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Timing It Just Right

Top 5 of the Week of August 27

Abnormal Returns Tadas Viskanta kicks off this week’s Top 5 with a look at the nature of investing. Real Investment Advice’s Lance Roberts discusses timing according to current valuation warnings. And Scott Bell, the writer of I heart Wall Street, reveals how we’re part of “the greatest heist in American history.”

Brent Leadbetter, John West, and Amie Ko of Research Affiliates examine the impact of systematic rebalancing. And Barry Ritholtz, Chairman & CIO of Ritholtz Wealth Management, writing for Bloomberg, explains how the there’s still life in the theory of loss aversion…


Finding Your Way in the Dark

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  • Investing is much like attempting to navigate through a pitch black room without bumping into anything along the way that may cause injury (in the form of loss)
  • We all know the oft-repeated adage that past performance is no indicator of the future but the trick to successful investing lies in working out how much it is going to differ
  • At it’s core, quantitive or factor investing resolves that the future will mimic the past pretty closely, the next challenge will be in determining when that changes

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Timing It Just Right

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  • It doesn’t matter what measure you use, the current message implies the same thing at the moment, “the expected rate of return for investors over the next decade will be low”
  • The issue with valuation measures is that there can be an extended period of time between a valuation warning and the follow-up market correction
  • Technical analysis can provide useful information for investors to heed the warnings and make the right move accordingly at the right time—just don’t leave the party too early

Which valuation measures do you adhere to? Share your comments in the section below

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Banking Lies

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  • The top 5 US banks hold $8.6 trillion dollars between them and—despite malfeasance activities in 2008—they continue to grow bigger and sell the most profitable products possible
  • These banks work hard to continue selling products to customers which are in their “best interests”—except they probably aren’t
  • Seek out an advisor who will be a fiduciary 100% of the time, otherwise, you are just continuing to pay into banking history’s “greatest heist”

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The Rebalancing Trick

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  • Taking a methodical approach to rebalancing is a worthy endeavor for investors to pick up over the traditional “wait-and-see what happens first” path
  • The advantages are that such systematic rebalancing can result in better long-term risk-adjusted investment outcomes
  • Advisors can help investors overcome any behavioral hurdles that may arise with what is effectively a contrarian investment stance

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There’s Still Life in the Old Theory Yet

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  • There’s been much importance placed on the theory of loss aversion in behavioral finance, yet some researchers argue that it’s a “fallacy”
  • However, it’s an extraordinary claim to make that the impact of losses and gains are uneven—one that is not necessarily backed up by any extraordinary evidence
  • Just because we display gain-seeking behavior doesnt mean loss aversion is cancelled out as a theory—because psychologically, if we were truly loss averse, then casinos wouldn’t exist—and yet, they thrive

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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.