Blog

The story of active management under-performance is retold on a monthly, quarterly, and annual basis.  And it appears that investors are listening, based on the wall of money that has flowed, and is continuing to flow, from active to passive funds.  In this context, I mean "passive" not only to be index tracking funds, but also funds like those offered by Dimensional Fund Advisors, who utilize broadly diversified portfolios to implement their investment strategies.   Much a...

Peter Coy writes for Bloomberg about how financial statistics are manipulated to tell stories that investors want to hear, even if they're not true.   He offers that the "core of the problem is that it’s hard to beat the market, but people keep trying anyway," then explains how financial firms manufacture investment strategies that are designed to capitalize on statistical anomalies.   Coy gives two examples of how pure statistical analysis, without the benefit of logi...

We published our "Why We Use Mutual Funds" post about three weeks ago, on March 27, to draw attention to the high, hidden costs of trading ETFs.   In today's weekend Wall Street Journal, Jason Zweig laments the same point.  Titled "The Expensive Ingredient of Cheap ETFs," his article explains how trading costs are "one of the worst destroyers of investment returns."   He oberves, "These costs lurk in the normally tiny space between the market price of an ETF and the...

by Devin Frampton   Does your brain affect your financial happiness?   You betcha.   Why can other people be happy about their finances? Are they merely making more money then you are? A study performed by Dr. Ryan T. Howell, a professor at San Francisco State University, suggests that your brain reacts to your choices about purchases, savings, debt, and related stress points. His study found that people who feel happy about their finances all follow a similar pattern.  ...

by Emily Kohnman   Barbara Stewart, CFA, writes for the Enterprising Investor about why women need finance, and finance needs women. We couldn't agree more.   Some of her key observations:   “Historically, few women knew much about finance — they didn’t need to. Few women had jobs, or didn’t make much money if they did…  Today, women are earners, executives, and the ones who make the majority of the household spending and financial decisions. All women, young and old, n...

When I was a derivatives trader in the 1980s and 1990s, a popular type of exotic option was invented, called the “lookback” option.   Traditional options allow the buyer to capture an asymmetric return based on an underlying index or asset price…. a way to speculate or invest in a very specific range of outcomes through a financially engineered product. A lookback option offered something even more highly engineered: the ability to set the option strike price and determine the payoff a...

There is a misconception that in order to retire comfortably, it is critical to have at least $1 million in savings.  However, this is a false narrative for the vast majority of retirees.   According to CNN Money, spending for a typical household headed by a retirement-age person is less than $47,000 per year. Consider that work-related expenses, such as commuting, business attire, and income taxes will generally fall precipitously in retirement.  Being retired also provides...

  The startup idea matrix is a clever table --- a Google Workbook actually --- that classifies consumer startups by market tactics and solution sets, suggesting strategies that businesses can apply in the B to B space.  This type of analysis is particularly interesting to us at North Capital, given the pace of innovation and creative destruction in the financial technology (FinTech) and regulatory technology (RegTech) industry segments, where we compete.   If one were to add...

For years prospective clients have asked us why we generally prefer to utilize mutual funds over ETFs in the construction of client portfolios, given the extremely low expense ratios and broad asset class coverage of ETFs.  For advisors who proselytize about diversification and the general efficiency of markets, as we do, ETFs would seem like the logical way to implement an asset allocation strategy.  Antti Petajisto has been studying ETF markets for over a decade, and h...

The Millennial generation has grown up in a technological world that distinguishes them from previous generations. Millennials are living at home longer, settling down later, and are more interested in access rather than ownership, online reviews, and global trends.  These preferences have significant implications for the future of markets for goods and services.  Rather than traditional services, millennials prefer digital services, from shopping to travel to carpooling with strangers...