A High-Level Views of the Asset Location Decision
David Booth on Professional Advice
The first decision you make with respect to your portfolio is its asset allocation, or the mix of stocks and bonds. This initial step is based on your tolerance for risk and the amount of risk you need to take to achieve your life and financial goals.
Once you’ve selected the appropriate asset allocation for you, the second decision you’ll need to make is one about asset location
Do Surprises Really Move Markets?
Dimensional founder David Booth shares his perspective on the value of professional advice. In an uncertain world, the right financial advisor can help you determine the best overall investment approach.
Déjà Vu All Over Again
French economist Louis Bachelier long ago remarked: “Clearly the price considered most likely by the market is the true current price: if the market judged otherwise, it would not quote this price, but another price higher or lower.”
2018 Market Review
Investment fads are nothing new. When selecting strategies for their portfolios, investors are often tempted to seek out the latest and greatest investment opportunities.
Here’s the Prescription
After logging strong returns in 2017, global equity markets delivered negative returns in US dollar terms in 2018. Common news stories in 2018 included reports on global economic growth, corporate earnings, record low unemployment in the US, the implementation of Brexit, US trade wars with China and other countries, and a flattening US Treasury yield curve.
Bear Markets to Be Borne With Equanimity
As much as I value the unfettered access to information the internet provides, I recognize the potential harm that too much information can cause.
Why Should You Diversify?
The holiday season is supposed to be about good cheer. Given the economic news, you might think investors would have plenty to be cheerful about.
Midterm Elections: What Do They Mean for Markets?
As 2019 approaches, and with US stocks outperforming non-US stocks in recent years, some investors have again turned their attention towards the role that global diversification plays in their portfolios.
What You Pay, What You Get: Connecting Price and Expected Returns
It’s almost Election Day in the US once again. For those who need a brief civics refresher, every two years the full US House of Representatives and one-third of the Senate are up for reelection
Do Mutual Funds Outperform Benchmarks?
It has been more than 50 years since the idea of stock prices containing all relevant information was put forth. Information might come in the form of data from a company’s financial statements, news about a new product, a change in the regulatory environment, or simply a shift of investors’ tastes and preferences toward owning different investments.
Sailing with the Tides
Our analysis of US-based mutual funds shows that only a small percentage of funds have outperformed industry benchmarks after costs—and among top-ranked funds based on past results, only a small percentage have repeated their success.
The Impact of Inflation
Embarking on a financial plan is like sailing around the world. The voyage won’t always go to plan, and there’ll be rough seas. But the odds of reaching your destination increase greatly if you are prepared, flexible, patient, and well-advised.
Don’t Exclude Emerging Markets
June 5, 2018
When the prices of goods and services increase over time, consumers can buy fewer of them with every dollar they have saved. This erosion of the real purchasing power of wealth is called inflation. Inflation is an important element of investing. In many cases, the reason for saving today is to support future spending. Therefore, keeping pace with inflation is a crucial goal for many investors.
Changing Market: Municipal Bonds After Tax Reform
May 23, 2018
Thirty years ago, emerging markets made up only about 1% of world equity market capitalization, and just 18% of global GDP. As such, the ability to invest in emerging markets was limited—the few funds available were high-cost, actively managed funds.
How to Think About Increasing Interest Rates
May 10, 2018
January is typically a strong month for the municipal bond market, but 2018 began with the worst January performance since 1981, driven by rising interest rates and uncertainty over changes in the Tax Cuts and Jobs Act (TCJA).1 The muni market stabilized through April 2018, but uncertainty remains.
Tuning Out the Noise
May 2, 2018
Interest rates have gone up relatively significantly this year. Figure 1 shows the increases in the one-, three-, five- and 10-year Treasury bond rates through April 18. While interest rates moves of these sizes have occurred a multitude of times in the history of the U.S. …
Correction Time: The Market Takes a Hit
April 20, 2018
Markets can be volatile. It's important to stay disciplined and tune out the noise.
2017 Market Review
March 1, 2018
After reaching all-time highs on January 26, 2018, the Dow Jones Industrial Average and the S&P 500 went into a two-week slide that saw both stock indexes drop by more than 10%, a decline that is typically considered a market correction.
Home Bias and Global Diversification
January 15, 2018
At the beginning of 2017, a common view among money managers and analysts was that the financial markets would not repeat their strong returns from 2016. Many cited the uncertain global economy, political turmoil in the US, implementation of Brexit, conflicts in the Middle East, North Korea’s weapons buildup, and other factors.
December 27, 2017
By pursuing a globally diversified approach to investing, one doesn’t have to attempt to pick winners to achieve a rewarding investment experience.