ESG indices provided lower absolute and lower risk-adjusted returns than the broad market index.

Planning for a successful retirement is about much more than just an investment strategy that will provide you with sufficient assets to fund your desired lifestyle. It’s also about planning for a meaningful life in retirement.

While an inverted curve may be a reliable indicator that a recession is likely to begin, on average, within 16 months, it is not an indicator reliable enough to allow you to profitably time stock markets.

Non-fundamental demand shocks caused by naive retail investor fund flows help explain the momentum factor.

A new paper from the Federal Reserve Bank of Boston explores the implications of the active-to-passive shift.

Because so much of long-term returns occur over very brief periods, it’s critical that investors stay disciplined, adhering to their asset allocation plan and not paying attention to the noise of the market.

Research demonstrates that the investment factor has explanatory power for the cross section of stock returns, with high-investment firms tending to underperform low-investment firms.

The investor preference for cash dividends has a long history of observation, analysis and, largely, derision. Those in the classical theory camp consider the preference to be irrational and costly. Behavioral economists have been more concerned with explaining what causes it. Practitioners must determine what to do about it with the clients they advise.

As tempting as the proposition might be, there isn’t convincing evidence that a style-timing strategy will be profitable.

I will examine three concerns that are often raised about factor-based investing.

With the S&P 500 Index losing 13.5% in the fourth quarter of 2018, the risk of catastrophizing – not only focusing solely on the negative news, but assuming the worst will occur – increased. Reviewing the historical data, however, keeps you from catastrophizing your own financial situation.

This book tells a story about planning that is intuitive, easy to follow and checklist driven, making the seemingly impossible achievable.

Public pension plans are destroying investors’ wealth by allocating assets to separate account managers, private equity and hedge funds.

We’ve collected the following tributes to Jack Bogle from among the authors who contribute to Advisor Perspectives and other prominent individuals in the investment industry.

On Dec. 3, 2018, the yield curve inverted, with the yield of 2.83% on the five-year Treasury note falling to 1 basis point lower than the yield of 2.84% on the three-year Treasury note. Perhaps that “dreaded” event contributed to the Dow Jones industrial average’s 795 point fall that day.

Despite representing about one-eighth of global equity market capitalization, and despite the attractive valuations and growth prospects, the vast majority of U.S. investors have portfolios that dramatically underweight emerging market stocks. Here’s why that is a costly mistake.

I’m often asked for a list of what I consider the best books on the science of investing. With that in mind, I sat down and narrowed my collection to the top baker’s dozen.

Today I’ll look at the conventional wisdom that the tax burden of an investment strategy increases with its turnover. In addition, I’ll discuss why short selling is perceived to be particularly tax inefficient.

The “bucket approach” to retirement planning has been routinely adopted by financial planners, ever since it was popularized by Harold Evensky. Clients keep several years of assets in safe, liquid investments, while investing the rest of their portfolio more aggressively. But new research shows that this approach actually destroys a portion of clients’ wealth.

As is our custom, we conclude the year by reflecting on the 10 most-read articles over the past 12 months. In decreasing order, based on the number of unique readers, those are…

Investing in municipal bonds is riskier than many investors may perceive, with last year’s $74 billion default by Puerto Rico providing a reminder.

Today my colleague at Buckingham Strategic Wealth, institutional services advisor Tim Jost, will look at some of the latest research on the momentum factor.

A recent survey found that almost 50% of Democrats were not investing. This compares with less than one-third of Republicans not investing. What is behind this dynamic?

Investors should seek opportunities with unique sources of risk and return that improve the efficient frontier by providing diversification benefits. However, understand that some investments exhibit negative skewness and high kurtosis while sacrificing the benefits of daily liquidity.

The 10th anniversary of the Great Financial Crisis is the subject of lots of articles and media coverage. As a result, I’ve been getting many questions about what caused that crisis and the lessons we can take away to prepare for the inevitable next one.

How risky is factor-based investing?

In another article, I looked at the size and volatility of the three equity premiums of beta, size and value. Today we turn our attention to the two premiums that help explain the performance of bond portfolios: term and credit.

Over the almost 25 years that I have been an investment advisor, I’ve learned that one of the greatest problems preventing investors from achieving their financial goals is that, when it comes to judging the performance of an investment strategy, they believe that three years is a long time, five years is a very long time and 10 years is an eternity.

Because of the risk of data mining, an important criterion for considering an investment strategy (such as a factor) is to not only see that a factor adds explanatory power to the cross section of returns while delivering a premium, but that the premium is persistent across time and economic regimes and is pervasive around the globe. By examining the performance of factors outside of the U.S., we create out-of-sample tests.

When studies are done on active versus passive funds, they should be performed on an apples-to-apples basis – to account for different exposures to the factors, such as size, value, momentum and profitability/quality, that explain differences in returns. Here’s how some researchers who failed to do this reached a surprising conclusion.

Perhaps the simplest strategy is to hold just three funds. For equities, you can own the Vanguard Total Market Index Fund and the Vanguard Total International Stock Index Fund. On the bond side, you can own the Vanguard Total Bond Market Index Fund. But such an approach ignores the academic evidence demonstrating there are certain factors that have provided above-market returns to investors willing and able to accept their additional risks.

I’ve been getting lots of questions lately about the merits of owning TIPS versus nominal bonds. With that in mind, today I’ll discuss how to determine the more appropriate strategy.

Research provides evidence supporting the pervasiveness of the size, value and momentum premiums. That should give investors further confidence that the premiums found in these factors in developed markets were not a result of data mining exercises, which, in turn, should offer confidence that an ex-ante premium for these factors exists around the globe.

Retirement isn’t the sort of thing you can just jump into. Rather, it requires thoughtful planning and a modest amount of basic knowledge. Unfortunately, Americans seem to be sorely lacking in this regard.

If active management persistence is not significantly greater than should be expected at random, investors cannot separate skill-based performance (which might be able to persist) from luck-based performance (which eventually runs out).

When past returns are high, the risks of owning high-beta stocks significantly increase. Mutual fund investors should be sure they understand their fund’s level of exposure to market beta after periods of strong performance.

Investors and advisors have become concerned about the possibility, if not the likelihood, of the Treasury yield curve inverting. The reason for the concern is that the slope of the yield curve historically has been a good recession predictor.

The size premium’s relatively poor performance in U.S. stocks over the seven-year period from 2011 through 2017 caused many investors to question its persistence. I will address whether that skepticism is justified.

Once again, the economic calendar is fairly light. Vacations continue for many. The upcoming Labor Day weekend will tempt many market participants to end this week early. Financial news seems more like political news these days. Much of the punditry is focused on a death watch for the bull market, with daily discuss of the flattening yield curve and speculation about when it will “invert.” This is not the right question. Pundits should be asking: Should investors be worried about the yield curve?

Read Harold Evensky's latest Newsletter. 

Like clockwork, each year the S&P SPIVA scorecard reports actively managed funds’ persistent failure to outperform appropriate, risk-adjusted benchmarks. The only thing different, it seems, is that each year the active management community contrives yet another explanation for its failure. And each time, those explanations are exposed as lame excuses.

Most investors believe that all passively managed funds in the same asset class are virtual substitutes for one another. The result is that, when choosing a specific fund, their sole focus is on its expense ratio. That is a mistake for a wide variety of reasons. The first is that expense ratios are not a mutual fund’s only expense.

A question I’m often asked involves the merits of investing in private real estate as an alternative to publicly available REITs. To answer that question, I will turn to the historical evidence.

A landmark study looked back at more than 100 years of data and 23 countries to determine if there are reasons to believe the cross-sectional patterns in factor returns will persist, or whether they were just anomalies that tended to disappear after publication.

Women face at least 12 unique financial and life challenges related to long-term retirement planning. Addressing them can be overwhelming and uncomfortable. Only by understanding the issues can you develop strategies that will provide the greatest chance of achieving your clients’ goals.

We know the historical evidence shows there are premiums for factors, but how can you be confident that those premiums will persist after research about them is published and everyone knows about them? After all, we are all familiar with the phrase “past performance does not guarantee future results.” Here is my answer.

How a fund defines its universe of small stocks eligible for purchase will make a significant difference in performance.

The economic calendar is a light one, and many regular participants are on vacation. The most important data include PPI, CPI, and JOLTS, the best read on a tightening labor market.

Wall Street has ridiculed passive investing for decades. The reason is obvious: Its profits – and for many firms, their very survival – are at stake. The basic argument is that the popularity of indexing (and the broader category of passive investing) is distorting prices as fewer shares are traded by investors performing the act of “price discovery.” Let’s examine the validity of such claims.