Past is Prologue

Larry Swedroe writes (click here) about the latest report that active management is (as always) under-performing passive indices. As he says the past is prologue at least in this ongoing measurement of the failure of active management. We’ve wrote about this many times. It’s important to repeat the message since Wall Street and the mainstream financial media constantly push the idea that active management wins....

10% Correction To Do List

This link opens a PDF article written by Weston Wellington of DFA which quantifies the behavior of markets after 5% and 10% market corrections. It’s a brief article, written for the general public, complete and backed by sound data as is always the case with material from DFA. They’ve made it easy to digest, brief and provided a reasonable suggested conclusion: “Investors who accept dramatic price fluctuations as a characteristic of liquid markets may have a distinct advantage over those who are easily frightened or confused by day-to-day events and are more likely to achieve long run investing success.” I think the words “may have” are used purposefully to understate so that this article could be shared with the public. VERY IMPORTANT NOTE:  If you are reading financial media from any source which constantly sensationalize, then achieving Mr. Wellington’s conclusion above will be extremely difficult!!! The article gives more detail that I encourage you to review. Here’s a subset of the data without all the fine print of how the data was developed. 10% declines and subsequent 12 months US Large Cap (1/1926 – 6/2015) (happened 28 times)  annualized 12 month return after: 23.56% International Large Cap (2/2001 – 6/2015) (happened 9 times)  annualized 12 month return after: 24.73% Emerging Markets (1/1999 – 6/2015)  (happened 15 times)  annualized 12 month return after: 42.23% So what is the “to do list”. Well, if you are receiving and acting upon prudent advice, then the following approaches should already be in place. Retired and actively accessing a portfolio for some of your living expenses? Then you should have a 2-5 year cash reserves cushion that you access when the market has gone down 10%. Once it...