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Portfolio Solutions Blog

Rick Ferri
June 30, 2015

With the Fourth of July fast approaching, I am reminded of the many benefits of independence, especially independent investment advice. You would think that independent advice would be any adviser’s highest calling. Surely our mission should be to aggressively avoid direct or indirect conflicts of interest, so we can freely employ any funds or investments that best suit our clients’ needs.

Investors should expect this highest level of care from their adviser, and they should ignore recommendations made by any firm that won’t look at all the...

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Rick Ferri
May 14, 2015

I’d have a lot more money today if all I had ever done was buy index funds and hold onto them. Instead, early in my investing years, I bought “gems” like penny stocks before they went bankrupt, options on banks falsely rumored to be ripe for buy-outs, a vacation timeshare because I thought it had appreciation value, and Salvador Dali prints from a dealer who went to prison for selling fakes. If I had known Bernie Madoff, I probably would have begged him to take my money.

I find I’m not alone in having made dumb investment mistakes. The School of Hard Knocks has been well attended....

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Rick Ferri
May 07, 2015

I’m always interested in reading academic studies that measure how well professional mutual fund managers can time financial markets. Many fund companies routinely claim their experienced management and propriety research give them a leg up on knowing where the markets are headed next. But is it true? Have mutual fund managers made profitable timing decisions ahead of the markets’ next movements?

The past 15 years has been an ideal time to test timing skill given two significant stock market downturns: the technology bust of 2000 and the...

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Rick Ferri
April 28, 2015

Index fund investors let the facts speak for themselves. The long-term data comparing active funds to index funds shows actively managed mutual funds underperform in all asset classes and all investment styles. There is no ambiguity in the results, and there’s nothing new to report here. The data has been saying the same thing for decades.

But, we’re only human. We forget, and lies are constantly being told that cause us to second-guess our resolve. It’s a good idea to revisit the data at least once a year...

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Rick Ferri
April 20, 2015

Shoebox design has not changed much in 50 years. Shoeboxes are still the same shape, made of the same flimsy cardboard and hold one pair of shoes. The color and lid design do vary among companies, but it’s not a big deal for shoe buyers. We’re only interested in what’s inside the box.

The expansion of exchange-traded products (ETPs), which include exchange-traded funds (ETFs), has provided investors and advisers with more choices over the years. As of March 31, 2015, “The global ETF/ETP industry had 5,669 ETFs...

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Rick Ferri
March 26, 2015

Each year, I put my head on the chopping block and publish a 30-year forecast for global stock and bond market returns. This forecast is used to create long-term asset allocation strategies for our clients. It’s a terribly imprecise exercise because no one can know how financial markets will perform in the future. There are just too many variables and too many unknowns. Yet, here it is. So, why do I risk professional suicide each year with an expected return...

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Rick Ferri
March 05, 2015

(Triangle [left] Source: The author’s forthcoming book, “The Education of an Index Investor”)  

The cost to invest in mutual funds is often couched in terms of expense ratios and commissions. These are important structural costs and certainly worthy of your consideration. However, other costs are not so obvious that can eat deep into your investment return. It’s wise to know what those costs are and how they relate to each other.  

Two...

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