TERRY ODEAN has been studying investor behavior for decades. The University of California at Berkeley finance professor has proven again and again that everyday investors often harm their performance by trading too much.
Last year, Odean and his fellow researchers turned their attention to the Robinhood phenomenon. Result? When I spoke to Odean, he said the only thing that surprised him was the magnitude of the self-inflicted investment wounds by users of the free-and-easy trading app.
ALMOST EVERYTHING on Wall Street went up in April, including some of 2021’s laggards, such as gold, bonds and growth stocks.
Investors may not like President Biden’s capital gains and corporate tax hike proposals. But despite the president’s somewhat stealthy pursuit of policies worthy of Franklin D. Roosevelt, stock investors could be forgiven for breaking out into FDR’s 1932 campaign song, Happy Days Are Here Again. Consider:
Stocks have risen more in Biden’s first 100 days (symbol: SPY +9.8%) than in the same period of any president’s term since—guess who—FDR’s fourth.
WAS MARCH WHEN YOU learned what a nonfungible token was, because a digital file sold for $69 million? Was it when you told yourself you just had to find out more about SPACs? When you realized that the nation’s hottest fund manager, Cathie Wood, who you first heard about in February, was now a household name referred to simply as Cathie? As in, “Why does Cathie own Deere and Netflix in her new space exploration ETF?”
Then you and I are most definitely late to the party—and it’s probably best not to start dancing on the tables with the others.
IT’S BUYER BEWARE for bond fund investors. Three big risks have snuck up on today’s fund shareholders, which—taken together—mean higher volatility and lower returns.
I discussed these pitfalls with Ben Johnson, director of global exchange-traded fund research at Morningstar, the Chicago investment research firm. “In recent years, the market’s standards have loosened significantly and durations have lengthened,” Johnson told me. “People are generally willing to lend money to less creditworthy borrowers for longer terms….
RAMPANT SPECULATION in parts of the market has been obvious for months. Less obvious is whether investors collectively will pay a substantial price for it. Can a reflation trade end up piercing a market bubble?
Stocks posted solid gains in February—with the S&P 500 touching a record high on Feb. 12—but the final week felt a bit precarious, even if the benchmark ended the month down just 3.5% from that high. (Insert your favorite adjective to describe the correction so far: normal,
WELCOME TO OUR inaugural monthly personal-finance update. I was all ready to write about January’s robust stock market—and then the GameStop saga garnered national headlines, with short-selling hedge funds losing billions, everyday investors crowing and politicians piping up. Some bashed Wall Street for allegedly thwarting retail traders, while others worried about the financial system’s stability.
Amid the tumult, the S&P 500 fell into the red for the year-to-date, despite blockbuster earnings reports from two of the market’s longtime leaders,
MY OLD INVESTING self was like the guy in the meme who twists around to ogle a woman in a red dress, while his girlfriend looks ready to break his neck.
Just as jumping from one relationship to another introduces new risks, the same holds true for jumping in and out of different investments. For me—and for most people, I’d wager—investing in individual stocks and narrowly focused funds involves a certain amount of trading,
IT ISN’T EVERY personal finance book that includes a chapter entitled, “You Will Lose Money.” But that’s Ben Carlson laying down the harsh truth for inexperienced investors in his self-published fourth book, Everything You Need to Know About Saving for Retirement.
I interviewed Carlson recently because I find his A Wealth of Common Sense blog among the most useful for a small investor like me—someone with an intermediate level of market knowledge.
WELL, IT SOUNDED good. Academic theory and nearly a century of investment experience supported the argument that small-cap value is the most promising market segment over the long term, since it offers the superior risk-adjusted return that comes with owning both neglected small-cap shares and shunned value stocks.
But as legendary economist John Maynard Keynes observed, in the long run, we are all dead. In my 36-year investment career, both small- and large-cap value have lagged large-cap growth.
THEY WERE GURUS and gunslingers. Market mavens. Stock pickers and sector bettors. Over in the bond market, there was even a king. They were star fund managers—but most were shooting stars, destined to crash.
Yes, we’ve had managers like Peter Lynch, Will Danoff and Bill Gross, whose long-term returns did indeed beat the indexes. But for every winner like them, there have been—statistically speaking—seven who failed. Between 74% and 93% of funds in a variety of broad categories—small-cap,
TARGET-DATE FUNDS offer one-stop investment shopping. But what exactly are you buying?
These funds are intended to offer a diversified portfolio that’ll carry you through to retirement and beyond. Each follows a “glide path,” reducing its stock exposure over time. But the substantial differences among the funds means that some roads will be rockier than others, so it’s important to understand what you’re getting.
For instance, young investors in 2060 target-date funds—like my children—will have 90% or more in stocks.
YEARS AGO, when the kids were teenagers, single Dad here was cooking dinner. You guessed it, hot dogs.
I skillfully picked one up from the hot pan with my fingers and tossed it in a bun.
When my daughter began to imitate me, I nearly shrieked. She lacked my years of experience in gauging exactly how hot the sides of the dog would be, how far from the splattering grease I needed to position my fingers,
“THE CHINESE PLAY the long game. We play checkers, they play chess.”
You hear such sentiments from Americans a lot. It’s one of the narratives that draws foreign money to China. The story is so good, it distracts investors from an important fact: The oldest China exchange-traded fund, the iShares China Large-Cap ETF (symbol: FXI), has lost a quarter of its value since peaking in 2007. Yet somehow—helped by Chinese government pressure on index providers—China’s weight in the emerging markets indexes is higher than ever.
I’VE BEEN WRONG many times, as I’ve noted in earlier articles. But the past few months have made me—and maybe you—look like an investment genius.
I’ve had some nice “wins” since March 13, when I started buying the stock market dip. Does that make me brilliant? Of course not. Was I “right”? That depends on how I made my decisions. A quick profit doesn’t necessarily mean I made the right call.
Too often, when we analyze our investment moves,
CHINA’S CRUSHING of Hong Kong’s independence is just the latest aggressive move to raise my hackles—and make me question the wisdom of investing there, as well as in much of Asia. Which puts me in a tough position, since the Pacific Rim represents nearly 70% of the emerging markets indexes.
I hear you saying that politics shouldn’t factor into investment decisions. True, if returns are your only consideration, political and moral issues don’t belong in the conversation.