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This Chart Changes Everything Quant

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Image shown: Russell 3000 Value Divided by Russell 3000 Growth since September 1993, roughly one year after the publishing of the influential three-factor model. By Brian Nelson, CFA Recently, I wrote up my views on whether quant value is giving value investing a bad name. You can read that note here. The chart above changes everything quant. The chart is not so much about value and growth as it is about highlighting the hazards of extrapolating anything quantitative finance into the future. For those that don’t know why this chart is important, let me provide some background. The entire field of factor investing has been built on the idea that ambiguous and sometimes impractical metrics and data can be used to carve out … Read more

Is It Time or Timing in the Market?

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Image Source: Dimitris Kalogeropoylos By Brian Nelson, CFA Since joining the workforce after undergraduate studies, those that will be turning 30 years’ old during 2017 will have never witnessed a meaningful bear market, large down year, or even a substantial “correction” in the stock market during their working lives. That’s right — many workers that were born in the mid-1980s when Ronald Reagan was President are probably starting to believe that they’ve found the secret to investing success and that broader US markets only go up (or down just a little at times, but they always recover and go higher). No matter if this assessment of their opinion of the markets is true or not may not matter. At the … Read more

Podcast: FALLACY of Index Funds!

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The Valuentum Analyst team digs deep into the logical fallacy that paved the way for index funds, and the very real risks investors take while driving with their hands off the wheel looking only through the rear-view mirror. Summary Please read the first 3 minutes of the presentation (there is no audio at the beginning). Pause the program if you require more time to read. If you still don’t see the FALLACY that paved the way for the creation of index funds, be sure to comment below. The last 10 minutes of the program comprises a discussion by the Valuentum team of active versus passive. Looking forward to a good discussion. Please be sure to view the transcript below if … Read more

The Scary Reality of Indexing

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The S&P 500 Index Fund, and derivative ETF products such as the widely-followed S&P 500 SPDR (SPY), are perhaps the most common equity-based indexing instruments on the market today. The pioneer of index mutual funds, the Vanguard Group, defines indexing as follows (1): Instead of hiring fund managers to actively select which stocks or bonds the fund will hold, an index fund buys all (or a representative sample) of the securities in a specific index, like the S&P 500 Index. The goal of an index fund is to track the performance of a specific market benchmark as closely as possible. That’s why you may hear it referred to as a “passively managed” fund. Vanguard’s founder Jack Bogle launched the first … Read more