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Lessons From Our Most Read Five Questions Interviews
Now that we have completed our first year, I thought it might be interesting to take a look back at our most popular interviews and some of the important lessons that I learned from them. Below are our five most read interviews from our first year and the key lesson I took from each of them.
The Danger of Overscrutinizing Out of Favor Investment Metrics
No investing factor has been maligned more than the Price/Book in recent years. In a period where value in general has performed very poorly, the Price/Book has struggled more than any of the other common value factors. When you couple that with the fact that the Price/Book’s failure to account for intangible assets makes its validity questionable in a world where more than 80% of assets are intangible, you have a perfect storm for investors challenging the long-term validity of the factor.
Five Questions: The Man Who Solved the Market with Gregory Zuckerman
How was a mathematician with no formal stock market training able to produce those kinds of returns? That is the subject of the new book The Man Who Solved the Market by Gregory Zuckerman. We are very fortunate that Greg has agreed to join us this week for our Five Questions interview.
A “Protective” Alternative to the 60/40 Portfolio
A Framework to Evaluate Value Strategies
When I talk about value investing, I am talking about a more traditional definition of it. That means buying cheap stocks relative to current fundamentals. That could mean earnings or cash flow or book value or sales or a variety of other metrics. There are some funds out there that use the word “value” in their name, but don’t fit into this traditional value mold.
The Facts About Buybacks
Before we debate the merits of buybacks, it is important to understand what they are. Profitable companies generate excess cash on a regular basis. They have a variety of options for what to do with it. They can reinvest it back in their business. They can just keep it in the bank. They can buy other companies with it . They can pay down debt. They can pay dividends. They can also buy back their own stock.
Five Questions: Tackling Some of the Toughest Questions in Investing with Michael Mauboussin
There are many skills that can benefit you as an investor. Being smart is certainly an asset, although it can also get you in trouble if you don’t know your limitations. The ability to control your emotions is also a huge plus. But I think the most important skill may be the ability to think critically.
Five Questions: Factor Timing with Nicolas Rabener
Factor timing is a pretty controversial topic in the quantitative investing world. On one hand, we are all taught that we should buy low and sell high, so it seems intuitive to add exposure to factors that are out of favor. But in reality, it isn’t that simple and factor timing is much more difficult than it would seem in theory.
The Rising Bar for Active Management
Why Use One Value Factor When You Can Use Many
Why Return Skewness Offers Some Hope for Value Investors
Never Say Never
A New Method for Rebalancing Helps Systematic Models Get Better
What I Do With My Personal Portfolio
Every person is unique and everyone has many different factors that impact how they manage their money. I think looking at someone else’s portfolio is much more useful from the perspective of analyzing the thought process they use to arrive at what they own rather than a recommendation to own any of those things.
Five Questions: Hidden Risks in Investing with Corey Hoffstein
Investing in the stock market is a risky activity. The obvious risks like losing a large portion of your portfolio during a bear market, or underperforming the market by a wide margin if you employ an active strategy can be more than many investors can handle.Given th high level of risk that is inherent in investing, it doesn’t make sense to take more risk than you have to.
Five Questions: Lessons From Finance History with Jamie Catherwood
It is clear we can all benefit from some more knowledge about market history. And that is the focus on our interview this week. Jamie Catherwood is known as “the Finance History Guy” on Twitter. Despite just graduating college in 2017, he has used his deep knowledge of finance history and his impressive networking skills to amass over 16,000 Twitter followers (yours truly has barely crossed 1000). He also was recently hired as a Client Portfolio Associate at O’Shaughnessy Asset Management.
Six Common Misconceptions About Factor-Based Strategies
Five Questions: Questioning Conventional Wisdom With Lawrence Hamtil
My favorite people to follow on Twitter are those who make me think about things in different ways than I currently do. One person who certainly fits that bill is Lawrence Hamtil of Fortune Financial Advisors. In this interview, we will cover those topics, as well as several others that might make you challenge what you think about some popular investing topics.
The Lure of the Unsolvable Problem
Just when you think you are good at investing, the market has a way of humbling you and making you realize that no one will ever completely figure it out. That may sound like a stressful thing, but in reality, it is what makes doing this job great. For someone who strives to constantly learn and to constantly improve, there is nothing better than something you can never get too good at.
The Danger of Judging Decisions by Their Outcomes
Five Questions: Defending Value Investing with Tobias Carlisle
Here is part I of our two-part discussion on value investing. In this part we discuss the arguments against value and why the future may look better than the past decade has. In Part II, we will take a more detailed look at the process of building a value portfolio.
Five Questions: Investing in Human Freedom with Perth Tolle
The primary focus of most investors is generating returns. And that certainly makes sense given that we all have future goals we are trying to attain, and our portfolios are the major tool we have to achieve them. In recent years, however, there has been another goal that has been rising in importance. Many investors now also want to use their portfolios to express their values.
Some Lessons For My Former Investing Self
One of the most dangerous games we all can play in investing is the game of looking back and thinking about what we should have done. Hindsight bias leads us to believe that we should have known all sorts of things that there was no way to know at the time, and that leads to conclusions that would have been very difficult to draw with the information that was available then.
What Quant Value Models Can and Can’t Do for You
A few years ago Griffin wrote a very good piece — Ben Graham’s Value Investing ≠ Fama/French’s Factor Investing — explaining why buying stocks based on measures like book-to-market (the inverse of price-to-book) is nothing like the Ben Graham / intrinsic value way of investing.His comment and his previous piece got me thinking about how important it is to understand what quantitative value models can and can’t do.
Differences in Value
As an investor, understanding why there can be such big differences between value portfolios can be a very important question to answer. To get at that answer, at least partially, I thought I’d look across the spectrum of value models run on Validea to see how value stock selection strategies can differ and what investors may be able to learn from this.
Five More Questions: Factor Investing with Jim O’Shaughnessy
This is Part II of my interview with Jim O’Shaughnessy. If you missed Part I, you can find it here. In part II, we talk about trend following, the future for simple value investing, and we take an in depth look at some of the arguments others have made in favor of the death of value investing.
The Mechanics of Value Investing
We all have a tendency to want to put investing strategies into groups. That can sometimes be misleading, though. There are more investment products than I can count that use the word value in their name. But beneath the surface, many of those products couldn’t be any more different. Those differences can lead to substantially different outcomes in both the long- and short-term, so it is very important to understand the investment process and parameters used to create any value portfolio before you invest in it. Since I often discuss value investing in my articles, I thought it might be helpful to take a step back and look at some of the important details to consider when building or analyzing any value strategy.
Five Questions: An Academic Look At Factors With Lu Zhang
One of the major challenges that the finance community has faced over the years is how to explain what drives stock returns over time. If the market is efficient, then the only way to generate excess returns is to take more risk. But risk only makes sense to take if you get compensated for it. Determining which risks receive that compensation has been the subject of significant research in the academic community for many years.