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A Bit of Portfolio Tailoring Here, and a Touch of Hedging There

Top 5 of the Week of June 19

In our Top 5 this week, The Irrelevant Investor Michael Batnick discusses the driving factor of investing success and failure. Tadas Viskanta of Abnormal Returns shares investing wisdom from top finance writers. And Corey Hoffstein, author of the Flirting with Models blog, uncovers his financial planning research.

Philip Huber, from Bps and Pieces, reveals the “unsung heroes” of the financial world. And Bloomberg’s Noah Smith explains why it might be smart to worry about ETFs…

Juggling Our Emotions


  • Investing is an intensely personal ordeal; the driving force behind our search for optimal returns is not just the data but our emotions
  • So, while we all invest in the same stock market, we each approach investing in our own way—actual returns may be identical for two investments, but each investor will feel a very different satisfaction yield from the process
  • It is the influence of our emotional returns which explains why investing behavior is a leading cause of success and failure

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Investing Wisdom


  • Tom Brakke, “Very few investors, including professionals, can avoid the tug of historical numbers when making decisions”—Don’t build up false judgement based on past performance
  • David Shvartsman, “Top traders and investors work to find strategies that suit their personalities”—Find an investing approach that enables you to stay committed
  • Charles Sizemore, “Overweighting a position, no matter how good it looks, is almost always a bad idea”—The odds can work against even seasoned professionals

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What financial wisdom would you add to the list? Share your comments in the section below

A Bit of Tailoring Here, and a Touch of Hedging There


  • In asset management, there is a gulf between research and individual investors; resulting in generic portfolios untailored to time horizons, spending requirements, and tax pressures
  • We rely on financial advisors and planners to bridge that gap, assessing risk capacity and introducing cash or leverage to reinforce the individual level of tolerance
  • But, research shows that higher risk portfolios should be tailored to Value and Momentum, and for lower risk levels we should hedge with Low Volatility and Quality

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Unknown Investing Heroes


  • Developer of the first open-end mutual funds: Edward Leffler who revolutionized the mutual fund by enabling it to grow— by replacing shareholders who left with new ones
  • Or pioneer of the first index fund by William Fouse who married “modern portfolio theory concepts” to “practical investment application” for the first time
  • And Nate Most, who laid the groundwork for the first ETF, his commodities trading experience founded how ETFs function today—though it took three years for the idea to take root

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ETFs—Should We Be Concerned?


  • When it comes to financial innovation, we only tend to discover a fault in any new process when it breaks down
  • Which suggests that we should be asking if the growth of ETF popularity indicates the ETF market is headed towards disaster?
  • As ETFs expand into broader and more “exotic” markets, they increase the liquidity risk of being immersed in a 2008-style crunch, so, maybe we should be concerned

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Top 5 of the Week is a summarized collection of financial investment articles that we like and think you might like too. Having written thousands of pages of equity strategy and company research between us, we understand the allure of the ever-changing world of finance. Investing is an art form—and like everything, something you can work on and improve at. There are some excellent writers out there on the finance web, some offer a running commentary on today’s market, some are doing research, some have tips on how to Become a Better Investor, and some just lift the cloud of fog behind a lot of financial jargon. Each week we will keep you up to date with the top 5 articles worthy of your attention.


Anything you would like to discuss about this week’s top 5? Do you have another favorite that isn’t mentioned here? Feel free to add it below. Let’s start a discussion in the comments section!

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DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article. The Become a Better Investor Team doesn’t necessarily endorse any stocks or shares mentioned in the articles or the author of such articles linked to and summarized in Top 5 of the Week and cannot guarantee the accuracy of its information.