Investing

The market share of passive investing

This is the second part in a series examining the evidence behind the claim that passive investing is causing a bubble. For the first part, on Sharpe’ Arithmetic of Active Management, click here. — For any investment strategy to distort the market, it must be big. Very big. And, despite all the clamour around the …

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Is passive investing causing a bubble?

Is passive investing really worse than Marxism? Is it creating a ‘frightening risk for markets’? Or are the concerns around passive investing nothing more than trumped-up fearmongering? This series begins by examining one of the most fear-inducing (and therefore one of the most persuasive) claims thrown at passive investing – that the rise of passive …

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The best investing blogs

Following on from my last article on ‘The best investing books for beginners’, which proved to be a popular post, I’ve compiled a list of my favourite investing blogs below. Eventually my intention is to collate all my favourite resources (books, blogs, and podcasts) into one place, so this post makes a start at collecting …

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Smooth is what we aim for

Let’s say I offer you a simple gamble. You take £100 of your own money, then toss a coin. If it’s heads, you win 40%, if it’s tails you lose 30%. Would you accept the gamble? Simple maths says you should – the expected return is +5% (50% * 1.4 + 50% * 0.7). But …

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Why nobody likes diversification

I work as an investment manager, and a few years ago I had a boss called James (not his real name). His job was mainly portfolio construction, but he occasionally took client meetings and provided portfolio updates to some high net-worth individuals alongside the relationship managers. He had a vast repertoire of favourite sayings that …

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International diversification: The evidence – Part 3

If you cast your mind back to this post (Against International Diversification), we saw some legitimate, evidence-based reasons which might support not diversifying internationally. Specifically, we saw that cross-country correlations are high, and that correlations are likely to converge to 1 during a crash. But are these arguments good enough to justify heavily overweighting our …

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Return expectations – 2020 edition

How much can a UK-based investor expect to make on their investments over the next 10 years? To help answer the question, I’ve collated 10-year equity return forecasts from as many different (reliable) sources as I could find – 13 in total. As with most things investing-related, the data was heavily US-biased and almost always …

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