My first book, The Only Guide to a Winning Investment Strategy You’ll Ever Need, was first published 20 years ago, in May 1998. With its 20th anniversary in mind, let’s see how my recommendations worked out for investors who followed them.
Based on the logical, risk-based explanations for the value premium, and the lack of evidence pointing to shrinking valuation spreads, my conclusion is that the most recent 10 years of performance is likely just another of those occasionally occurring but fairly long periods in which the value premium is negative.
New research shows a majority of active managers outperformed their emerging-market benchmarks, and did so by a wide margin (on average 1.57% annually). But it would be wrong to conclude that active management is the winning strategy in EM.
While factor-based, style investing in equities has become popular, its adoption has been much slower in other asset classes, including fixed income. New research shows that style investing can also be applied to bonds.
Despite the evidence, strong past performance is the prerequisite for manager selection by individuals as well as institutional investors. New research explains why investors are likely to get poor results from performance chasing.
Passive investing has been ridiculed by Wall Street for decades. The common theme is that indexing has become such a force that the market’s price discovery function is no longer working properly. Given the number of questions I get about this issue, one would think that passive investing is now dominating markets.
I’ve been getting lots of questions about whether the value premium still exists. Today I’ll share my thoughts on that issue. I’ll begin by explaining why I have been receiving such inquiries.
The U.S. bond market is one of the largest in the world, with managers controlling more than $2 trillion in assets. Given its size, an important question is identifying active bond fund managers that add value.
The traditional 60/40 model no longer can be expected to deliver the same type of results. A new model is for investors to move toward more of a risk-parity portfolio, with assets more equally divided among stocks, bonds and these new alternatives.
To address questions about the benefits of international investing and diversification, we don’t have to look too far back in time.
