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z - Cover Image: 2021: The Half Year in Charts

2021: The Half Year in Charts

These are the charts and themes that told the story of the first half of 2021. As always, the narratives followed prices. As prices change in the back half of the year, the narratives will change as well.

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z - Cover Image: The Long and Winding Road to Wealth

The Long and Winding Road to Wealth

As children, we’re taught that the shortest distance between two points is a straight line. Many expect investing to be the same, with high and consistent returns bringing you from point A (starting out) to point B (wealth). But markets don’t operate in the same realm as the physical world. There is no straight line when it comes to risky investments. Instead, the road to wealth is a long and winding one – two steps forward, one step back – repeated indefinitely.

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z - Cover Image: The New 60/40 Portfolio

The New 60/40 Portfolio

Is the traditional 60%/40% portfolio a thing of the past?

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z - Cover Image: Home Bias and the Best Time to Diversify

Home Bias and the Best Time to Diversify

The question for U.S. investors today is not whether home bias has helped. It most certainly has. The question is whether it will continue to help going forward. And because no one knows the answer to that question (we can’t predict the future), we need to diversify to protect ourselves from the unknown.

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z - Cover Image: Demystifying High Yield Bonds

Demystifying High Yield Bonds

S&P 500 valuations are at their most elevated level in history with the exception of the dot-com bubble. It wouldn’t be unreasonable for investors with a lower risk tolerance to be seeking out lower beta options in preparation for more difficult years ahead. High yield bonds have proven to be one such option over the past 35 years.

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z - Cover Image: What Can You Do ABout High Valuations?

What Can You Do About High Valuations

Historically, the best protection against a bubble or elevated valuations in a single asset class is to have exposure to other asset classes and strategies that do not have the same underlying fundamental drivers. This is ultimately an exercise in humility and risk management. Diversification, at its core, is an admission that you cannot predict the future and is employed to protect oneself from the many possible outcomes that lie ahead.

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z - Cover Image: The Most Important Rule in Investing

The Most Important Rule in Investing

Knowing what you own and why you own it may be the most important rule, but it’s just the beginning of the investing journey, not the end. Once you understand the “what” and “why” the hard work begins.

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z - Cover Image: Is Diversification Finally Working?

Is Diversification Finally Working?

Spreading your money across a wide range of investments, asset classes, and geographies is the ultimate form of saying, “I have no idea what’s going to happen in the future.”

For those of us who cannot predict the future, we diversify.

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z - Cover Image: The Great Reversal in Secular Trends

The Great Reversal in Secular Trends

When secular trends reverse, no bell is rung, and no one can believe that a shift has actually occurred.

But as narratives follow prices, the longer they are sustained, the more the story changes and the more people believe it. In January, there were few believers in a change to the status quo. Today, as the great reversals have continued, there are more believers.

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z - Cover Image: It's Not Different This Time

It's Not Different This Time

A reminder that it feels like this every time. Every time stocks fall a little, it feels like they’re going to fall a lot.

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z - Cover Image: The Worst Year for Bonds in History?

The Worst Year for Bonds in History?

What has served as a tailwind for decades (falling rates) is now a major headwind for bonds. There is simply no escaping bond math in which lower yields portend lower future returns.

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z - Cover Image: The Price of Admission in Bonds

The Price of Admission in Bonds

If the year ended today, it would be the worst ever for Aggregate Bonds, slightly edging out 1994. Interest rates are rising and there is little cushion from the coupon to soften the blow. For those that equate bonds with safety, this can be a tough pill to swallow. But bearing that risk is the price of admission for long-term bond investors.

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z - Cover Image: What If Interest Rates Don't Matter As Much As We Think?

What if Interest Rates Don’t Matter as Much as We Think?

Interest rate levels, in and of themselves, aren’t the sole cause of every market movement. They are just one factor among many that impact how people allocate their assets.
And maybe, just maybe, they don’t matter as much as we all think.

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z - Cover Image: Is this 1929 or 1998?

Is This 1929 or 1998?

An objective observer will note that the risk/reward in U.S. equities is less favorable today than it has been in quite some time. That says nothing about what will happen tomorrow, but if the price one pays for something still matters, it will be a factor weighing on returns for years to come.

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z - Cover Image: How Does the Stock Market Perform When Interest Rates Rise?

How Does the Stock Market Perform When Interest Rates Rise?

The problem with the current rate environment is we’ve never experienced interest rates this low before. Maybe investors will become spooked at lower rates than they have in the past. Maybe markets will be given the benefit of the doubt if the economy is chugging along. The truth is there is no rule of thumb with these things. But rising rates, in and of themselves, don’t always spell doom for the stock market.

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z - Cover Image: The Price of Admission

The Price of Admission

Declines in stock prices and the fear-inducing narratives associated with them are the price of admission for long-term investors.

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z - Cover Image: Stock, Bond, and Cash Returns: 1928-2020

Stock, Bond, and Cash Returns: 1928-2020

Looking through 93 years of returns for stocks, bonds, and cash won’t help you predict future returns for these asset classes. But it can give you a better sense of the risk involved in these asset classes since risk is much easier to predict than returns.

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z - Cover Image: 10 Things I'll Be Watching Closely in 2021

10 Things I'll Be Watching Closely in 2021

It's always hard to see things changing. And then along comes a year like 2020. Nobody had any of this on their list at the end of 2019. 2021 is sure to deliver some surprises, and unlike the last dreadful year, hopefully, they're for the better.

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z - Cover Image: Updating My Favorite Performance Chart for 2020

Updating My Favorite Performance Chart for 2020

You can always change someone’s mind about the markets by simply changing the start and end dates for your return series.

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z - Cover Image: Drawdowns & Melt-ups: The Year that was in the Markets

Drawdowns & Melt-Ups: The Year That Was in the Markets

2020 may look easy with the benefit of hindsight, but it most certainly was not for those of us who lived through it. If you survived 2020 as an investor without making an avoidable or unnecessary mistake, you outperformed this year.

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z - Cover Image: The Biggest Market Comeback of the Year

The Biggest Market Comeback of the Year

Just when you think you have the markets figured out, the narrative changes before you even have time to react.

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z - Cover Image: A Short History of Chasing the Best Performing Funds

A Short History of Chasing the Best Performing Funds

Investors don’t have a great track record when it comes to chasing the hottest fund of the day.

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z - Cover Image: My 2020 Investing Lessons

My 2020 Investing Lessons

Ten lessons and perspective on the year.

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z - Cover Image: The Biggest Stock Market Reversal in History

The Biggest Stock Market Reversal in History

2020 looks like it could go down in history as the worst intra-year drawdown that finished the year with a positive return. And the fact that those gains are now in double-digit territory is not something many (any?) people saw coming. The S&P 500 Index is now up well over 60% since bottoming in late-March.

Although the 2020 stock market is something of an outlier, it’s not out of the ordinary for stocks to see gains on the year despite large losses on the way to those gains.

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z - Cover Image: When the Siren Song of Market Timing is the Loudest

When the Siren Song of Market Timing Is the Loudest

Timing the market is hard for a plethora of reasons. Markets are right more often than people give them credit for. The direction of the stock market is impossible to predict in the short term. And, even if you get lucky by getting out at the right time, you still have to get back in at some point. Market timing requires being right more than once.

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z - Cover Image: Why Own Bonds When Rates Are So Low?

Why Own Bonds When Rates Are So Low?

Three reasons to own bonds:

  1. Bonds Tend to Rise When Stocks Fall
  2. Bonds Can Provide Added Return Through Rebalancing
  3. There Is No Alternative
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z - Cover Image: Investors Need To Be Comfortable with Volatility

Investors Need to Become More Comfortable with Volatility in Their Portfolios

The stock market has been all over the map this year. And, while 2020 is an outlier in terms of the wild ups and downs, volatility is something every investor is going to have to get used to in the coming years. You simply have to be willing to accept some form of volatility if you would like to earn anything on your capital.Volatility has always been part of the markets, but more so now than at any other time in history because interest rates are on the floor.

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z - Cover Image: Bull Case / Bear Case

Bull Case / Bear Case

There are simply too many unknowns and outside factors that can impact the economy, markets, sectors, and companies to ever give yourself permission to have complete certainty about the future.

Sure, strong opinions are fine, but they better be weakly held because the markets are a humbling place if you’re not willing to look at both sides of an argument.

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z - Cover Image: What Happens When Stocks Make New Highs

What Happens When Stocks Make New Highs?

If you’re not a short-term trader, then you’ll see that all-time highs are nothing to fear. Returns are actually higher 6, 12, and 24 months out. This isn’t a shocking revelation. Rising prices attracts buyers, it’s that simple. All-time highs are not an all-clear signal, no such thing exists. But neither are they a sign that the rug is about to be pulled.

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z - Cover Image: Are Emerging Markets Turning into the S&P 500?

Are Emerging Markets Turning into the S&P 500® Index?

Emerging markets are starting to look more like the S&P 500® Index over time. Eventually, that should be a good thing for investors in these volatile markets

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z - Cover Image: The Hardest Investing Questions to Answer

The Hardest Investing Questions to Answer

There are no easy answers, but the only sound advice when dealing with irreducible uncertainty about the future is to focus on what you can control.

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z - Cover Image: The Pros and Cons of Minuscule Savings Account Yields

The Pros and Cons of Miniscule Savings Account Yields

There are no easy answers when it comes to finding income in your portfolio these days. While it would be nice if retirees had the option of stashing their cash in a money market earning 5%, we have to invest in the markets as they are, not as we desire them to be. So today you pays your money and you takes your choice.

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z - Cover Image: Expect the Unexpected

Expect the Unexpected

2020 is teaching investors a lesson that should be apparent to all of us who watch the market closely: it is full of surprises. The best way to plan for surprises is to be ready for a wide range of outcomes.

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z - Cover Image: The Nifty Fifty and the Old Normal

The Nifty Fifty and the Old Normal

Individual stocks are often more confusing than the market itself and can lead to some contradictory outcomes, depending on your time horizon and which types of stocks you’re looking at.

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z - Cover Image: The Best and Worst Quarters in Stock Market History

The Best and Worst Quarters in Stock Market History

2020 is unprecedented for the number of times people have called it unprecedented. This year certainly is unique. But stock market volatility is not.

The reasons change but big moves in the stock market are nothing new.

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z - Cover Image: The Biggest Stock Market Rally Ever?

The Biggest Stock Market Rally Ever?

The stock market bottomed three months ago. In the 65 trading days since, the S&P 500 Index gained 41%, the strongest move off a bear market low in the history of the Index.

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z - Cover Image: There are Always Reasons to Sell

There Are Always Reasons to Sell

We feel losses harder than the we feel joy from an equivalent gain, so in order to protect ourselves from pain, we want to know all the things that can go wrong.

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z - Cover Image: The 2020 Stock Market By the Numbers

The 2020 Stock Market by the Numbers

2020 is a case study in the power of simplicity when it comes to portfolio management and investment decisions.

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z - Cover Image: Massive Up and Down Moves in Stocks in the Same Year

Massive Up and Down Moves in Stocks in the Same Year Are More Common than You Think

There have been two massive moves in the stock market this year (and this year is still not even halfway over). Once you start digging into the historical numbers, you begin to realize the stock market is even crazier than advertised. Surprisingly, huge up and down moves happening in the same year is not that out of the ordinary.

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z - Cover Image: How Much of the Bear Market Losses Have Been Recovered?

How Much of the Bear Market Losses Have Been Recovered?

It feels like we’ve already lived through 3 different cycles that would normally take place over the course of a number of years and 2020 hasn’t even reached the halfway point yet.

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z - Cover Image: The Diversification Drag and the Management of Luck

The Diversification Drag and the Management of Luck

You have to account for luck in the investment process. No one can prepare for good luck, but there are ways to manage bad luck. Diversification is one of the best tools available to avoid allowing bad luck to give you extreme outcomes at the worst times.

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z - Cover Image: The Best Source of Investment Income?

The Best Source of Investment Income?

Fundamentals are more complex than they seem. One of the simplest, yet most overlooked, stock market fundamentals is the dividend yield. Dividends also happen to be one of the most resilient features of the stock market over the long-term.

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z - Cover Image: Nothing Fails Quite Like Success in the Stock Market

Nothing Fails Quite Like Success in the Stock Market

The history of the markets shows nothing lasts forever. Investors have been waiting years for the biggest stocks in the stock market to falter and they’ve done just the opposite.

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z - Cover Image: What Happens to Stocks After a Big Up Month?

What Happens to Stocks After a Big Up Month?

One hard part about investing during such highly volatile periods is you can talk yourself into just about any scenario. Sometimes these huge bounces are the real thing. Other times they’re a mirage. By studying historical downtrends and volatile markets, we learn that they tend to open you up to a wider range of outcomes, both to the downside and the upside.

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z - Cover Image: Which Portfolio is Right for You?

Which Portfolio is Right for You?

Which portfolio is right for you? The one that you can stick to. And to find the portfolio that you can stick to, you have to have some idea for the amount of risk you are willing to bear.

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1,000 Words Tab

A picture is worth a thousand words. In each issue, we present one insight on a range of market, investment strategy, and behavioral topics. The 1000 Words Series is designed to provoke insightful and memorable conversations.
z - Cover Image: The Upside of Lower Downside

The Upside of Lower Downside

Investing may be simple, but it isn’t easy. We’re told to buy equities and hold them through good markets and bad. But few of us have the fortitude to calmly stay fully invested when prices are declining. When it comes to investing, your best offense is a great defense.

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z - Cover Image: 1,000 Words - The Silent Spoiler

1,000 Words - The Silent Spoiler

Inflation erodes your purchasing power slowly, but surely, even when the figures are small.

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z - Cover Image: 1,000 Words - Odds Are

1,000 Words - Odds Are

Trying to pick the best times to be in the market and when to be out is known as market timing. Unfortunately, trying to time the market to miss the lows means missing the highs too.

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z - Cover Image: 1,000 Words - The Shape of Markets

1,000 Words - The Shape of Markets

Bull markets tend to climb slowly over time, while bear markets drop abruptly without warning, often causing extreme volatility.

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z - Cover Image: Minds Over Markets: A Behavioral Guide to Investing

Minds Over Markets

This guide strives to help you achieve better long-term financial outcomes. Its main message is that doing so is more about setting the right goals and controlling your own behavior than it is “beating the market.” We provide plenty of historical perspective on markets, but only in the service of confronting our natural tendencies to make poor decisions about money.

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z - Cover Image: The Active Investor's Field Guide

The Active Investor's Field Guide

Recent financial innovations have created both a wealth of opportunity and an avalanche of complexity for investors. It has never been easier—or more overwhelming—to take investment risk. With complexity comes the need for simplification. How do investors cut through the noise and take control of their portfolios? This guide offers perspective on the so-called active and passive investing debate, with an eye toward prioritizing diversification, risk management, and investor behavior.

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z - Cover Image: What's Your Number?

What's Your Number?

There are four steps to calculating your "retirement number" - the number of dollars you most probably need as a sum of capital from which to draw a lifestyle-sustaining income without serious danger of running through the capital.

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Market leadership changes from year to year and predicting the winning style is impossible. These tables highlight the importance of diversification.
z - Cover Image: Elements of Diversification - Countries

Elements of Diversification - Countries

Country leadership changes year after year — but it’s not possible to predict future winners.
Diversification is the answer.

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z - Cover Image: Elements of Diversification - Sectors

Elements of Diversification - Sectors

Sector leadership changes year after year — but it’s not possible to predict future winners.
Diversification is the answer.

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z - Cover Image: Elements of Diversification - Asset Classes

Elements of Diversification - Asset Classes

Asset class leadership changes year after year— but it’s not possible to predict future winners.
Diversification is the answer.

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