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.
In this episode host Belle Osvath, CFP® talks with Doug Pugliese who is the Head of 1042 QRP Strategies at Alpha Architect. They discuss 1042 exchanges which allow the owner of a closely held C-Corp to sell their equity to an employee stock purchase plan and defer long-term capital gains as long as they rollover the proceeds into a qualified investment. Doug talks about the benefit to a company and the employees when creating an ESOP and does an excellent job at breaking down the strategy behind the decision. Doug also identifies which business owners are ideal candidates for this type of exchange and discusses the limited investment options that business owners have historically faced and how his team is working to change that. If you have business owner clients our are just curious about this innovative approach to 1042 exchanges this is the show for you.
In this episode host Belle Osvath, CFP® talks with Dr. Wesley Gray the founder of ETF Architect and Alpha Architect, about how advisors can create their own ETFs which can be used to help manage client funds and taxes. They discuss the creation process, the cost, and what type of advisory practice would benefit the most from their own ETF.
Doug Pugliese, the head of our 1042 QRP business, was recently invited on the ScuttleButt Podcast to discuss the ESOP landscape and the costs and benefits of 1042 QRP transactions. (article on the topic is here).
On this week's episode, Isaiah is joined by expert Dr. Wesley Gray, CEO of Alpha Architects, to discuss the concepts of value ???? investing.
In this episode, Wes talks with Doug and Greg about why Alpha Architect is abnormal, the method to their madness, how Wes challenged Eugene Fama (and nearly won), how Alpha Architect is responding to today’s volatile markets, and what the future looks like for value investors.
A lot of people ask me how I invest my own money, and I am always happy to oblige. But I have never discussed the topic in the public (unlike my friend Meb, who has a post dedicated to the subject). However, this past week Justin and Jack asked if they could grill me on my personal portfolio for their excellent podcast, "Excess Returns."
Ben and Cameron, which host the excellent Rational Reminder podcast, sit down with Jack Vogel and go through a laundry list of factor investing questions
Here is a link to our recent chat on The Meb Faber Show regarding the details on Value Investing: An Examination of the 1,000 Largest [...]
Here is a link to our recent chat on The Meb Faber Show regarding the details on how to launch an ETF: This topic is [...]
Our chat with Wes Gray illuminates the subtle nuance and discipline of concentrated factor investing, the difference between behavioural and risk-based factor premiums, and the [...]
Wes Gray, CEO of Alpha Architect, talks about the value rotation, momentum stocks, the ETF white-labeling business, and more with Nate Geraci. External link to the [...]
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