Why is carry doing so well? How did this convergent strategy end up benefiting from one of the biggest geopolitical shocks in modern times? By examining this question, investors will be better informed about how to build better portfolios and whether carry should have a strategic slice of the portfolio pie.
Trend following is finally moving while U.S. stocks are flat. And so—like with most assets or strategies that post strong returns—investors may be eyeing this particular strategy and asking: Is it time to get in? The answer, while not surprising, is definitely nuanced.
Long volatility should be considered a factor that earns positive returns over the long term. At least that's what One River Asset Management’s Patrick Kazley suggests in his piece "Heretical Thinking: The Long Volatility Premium"
Gold has jumped from sleepy sideshow to dominant market narrative in a short span of time. For years, owning gold did not move the needle, and only introduced unnecessary noise to investors' portfolios. Then, in 2023, things started silently shifting in the background. Today, after a parabolic mid-summer move followed by a short correction, investors are now asking themselves: is it too late to buy gold?
We're going to examine the market’s current concentration and valuation to better understand return expectations going forward. But reader beware; this isn’t some bold macro prediction to scare you away from sensible investing. It’s a reminder that markets move in cycles, valuations eventually matter, and history has a way of humbling even the most confident forecasts.
On April 2nd, President Donald Trump announced sweeping tariffs against nearly every foreign economy. A blanket 10% tariff applied to all imports, even from places like the Heard and McDonald Islands, which have no permanent residents, and up to 50% for specific countries like Lesotho, Cambodia, and Vietnam. The reaction was immediate. Stocks cratered, risk assets sold off, and confidence evaporated almost overnight. Why such a sharp response? Tariffs themselves aren’t new; countries use them all the time. But this felt different, and for investors, it raised an unsettling question: was this another 2020-style shock in the making, or just a temporary scare?
Today, phrases like “HODL” and “buy the dip” have become rallying cries for equity investors. But is this mindset always correct? Could there come a time when buying dips or holding at all costs turns out to be a mistake? To dig deeper, let’s look at insights from Michael Mauboussin and Dan Callahan’s recent paper, Drawdowns & Recoveries: Base Rates for Bottoms and Bounces, and consider what the evidence tells us about the nature of drawdowns and recoveries.
Buffer ETFs have become one of the fastest-growing product lines in finance. But what risks are buffer investors carrying without realizing it? Let's zoom in on the two areas where they fall short and propose potential solutions that seek to address these issues.
On the surface, buffer ETFs appear attractive: they seek to capture some upside while mitigating a portion of losses. However, this does not mean they are risk-free. In fact, under certain market conditions, these products can significantly underperform.
Buffer ETFs have moved from niche idea to mainstream product in just a few years. That’s not just growth—it’s a trend! But what’s behind it? Are buffer ETFs a breakthrough in risk management… or are they more complex and potentially riskier than they appear?
Diversification is the only free lunch in investing. If you’ve spent even a day exploring the world of finance, you’ve likely encountered this common truism. But chances are, you’ve also heard stories of someone turning a small stake into millions by going all-in on just one or two stocks. That contrast raises a natural question for many investors: how many stocks should I actually own in my portfolio? Too many stocks, and you might be leaving opportunities on the table. Too few and you risk losing your shirt! So how do we strike a balance?
If you’re a factor investor, there will come a time where you will have to choose between mom and dad: Should you combine or separate your factor exposures? And make no mistake: You will have to make a decision! While there’s no right answer, the way you structure your portfolio can have significant implications for returns, costs, and even your own behavior as an investor. Let’s walk through the logic behind both approaches.
Modern Portfolio Theory (MPT) has long served as a foundational framework for asset allocation and portfolio construction. This concept remains influential in both academic finance and practical investment management. But the question investors face today is not whether MPT was revolutionary—it clearly was—but whether its insights still hold up under real-world conditions, decades later.
Let’s break down how to build a robust factor portfolio—without getting lost in the weeds. We investigate which equity factors have the strongest historical returns and diversification benefits from a long-only perspective.
Investing isn’t about being mostly right. In fact you can be mostly wrong and beat portfolios that were mostly right! Today, we’ll explore how investors can potentially improve portfolio outcomes by targeting two seemingly contradictory but deeply complementary systems as outlined in the latest Mauboussin-Callahan paper, Probabilities & Payoffs: The Practicality and Psychology of Expected Value. But understanding this counterintuitive reality requires a shift in mindset—one that embraces uncertainty and focuses on the power of diversification.
Dividends are the comfort food of investing. Who wouldn’t love feeling like they’re getting a seemingly “free” payout just for holding onto a stock? As with all good things, there's a little more—perhaps a whole lot more—to the story. Here’s why: even in a tax-free setting, selling stocks before dividend payouts can lead to abnormal returns.
Trend following, at its core, is a strategy where investors buy an asset when it's going up and sell when it’s going down. But unlike panic-driven investors who sell at the worst possible moment, trend followers adhere to a rules-based approach in an attempt to remove emotion from the equation.
Since 2010, the S&P 500 has beaten the International Developed market in all but three years. This led the U.S. market to outperform International Developed by an astounding 8.14% compounded per year. Wowza! Talk about pain if you’re a global investor.
The key to success is studying for Level I and Level II not for the sake of passing that level, but for the sake of passing Level III.
Convexity can provide explosive payoffs from unlikely events. It’s a powerful weapon to wield, but like most weapons, it could be inefficient or even dangerous in the hands of the untrained.
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