Market Summary – Q2 2013
The US Stock market continued to deliver strong gains this past quarter with the broader index (as measured by the S&P 500) gaining almost 14% year to date through June 30th and ahead almost 3% for the quarter. As it happened, most of the other asset classes we invest in were not invited to the party and generally lost ground over the past three months. Some of the safest investments were hardest hit such as bonds – which lost value as interest rates rose. Treasury Inflation Protected Securities, also known as TIPS, lost over 7% for the quarter, the majority of which occurred in...
Read MoreOctober 2013: Nobel Prize to Efficient Market Pioneer
The Royal Swedish Academy of Sciences announced on October 14, 2013 that Eugene Fama, Professor of Economics at the University of Chicago will share in this year’s Nobel Prize for Economics.* We congratulate Gene Fama on the well earned recognition he has achieved. Fama’s research with long-term collaborator Professor Kenneth French from Dartmouth has been focused on the efficiency of markets and the higher expected return from small company and cheaper [value] stocks. This provided insight and inspiration to David Booth, a former student, who went on to establish Dimensional Funds...
Read MoreSeptember 2013: Where Are The Bargains Now?
As we write this, the US Stock Market appears to be on fire, with the S&P 500 gaining over 20%1 year to date and over 60% in the past 3 years! During much of the four year plus stock market recovery since the lows of March 2009, money continued to flow out of stocks and into bonds despite the recovery taking place. That sentiment has suddenly reversed in 2013 with positive flows into equity mutual funds and ETFs. The “risk on” sentiment has provided price support for the broader equity market and helped to create a receptive market for a host of IPOs, most recently announced –...
Read MoreAugust 2013: The Art of Letting Go
The Art of Letting Go The Chinese philosophy of Taoism has a word for it: “Wu wei.” It literally means “non-doing.” In other words, the busier we are with our long-term investments and the more we tinker, the less likely we are to get good results. That doesn’t mean, by the way, that we should do nothing whatsoever. But it does mean that the culture of “busyness” and chasing returns promoted by much of the financial services industry and media can work against our interests. The fund managers we work with constantly review the holdings and make changes in individual stocks or bonds to...
Read MoreTarget Date Funds: Fiduciary Concerns for Plan Sponsors
Target-date funds (TDFs) have become the standard default investment choice for 401(k) plans since the 2006 Pension Protection Act approved them for this use. However, TDFs from different providers should not be considered perfect substitutes. They differ in several key areas: investment philosophy, glide paths, and costs. Understanding these differences is a requirement of plan sponsors under ERISA’s “prudent expert” rule when choosing the investment line up for their 401(k) plan. This paper seeks to explain the distinctive characteristics of TDFs in an effort to help investment committees...
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