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The Inflation Advantage of Equal-Weight

by: Lawrence Hamtil  on Tuesday, August 28, 2018

I have written favorably several times before about the advantages of equal-weighted portfolios, and it is worth reminding readers that going back to 1990, the S&P 500 Equal-Weight index has not suffered a single negative 120-month return, which stands in stark contrast to the capitalization-weighted parent index, which experienced several negative 120-month periods around the time of the financial crisis: Read More

This Tech Cycle Has Not Been Like Any Other

by: Lawrence Hamtil  on Monday, August 20, 2018

Over the last few years, I have highlighted a few flaws which I see in index-only investing (see here, here, and here).  Chief among those flaws, as I see it, is that the index tends to overweight expensive sectors and companies at the expense of cheaper ones, thus inhibiting somewhat the performance of the portfolio.   Read More

Why You Should Not Bet On (High) Beta

by: Lawrence Hamtil  on Thursday, August 09, 2018

One of the more fascinating theories in behavioral finance is the "theory of leverage aversion," which, simply put, is the notion that investors who cannot or do not wish to add leverage to their portfolios (in order to magnify returns) instead do the next best thing, which is to load up on stocks with high beta.  In rough terms, a high beta stock is one with higher-than-average volatility than the overall stock market, but also therefore a higher chance of outperforming the market by delivering outsized returns, something researchers have come to call "lottery stocks."   Read More

A Min Vol - Momentum Barbell for Overseas Markets

by: Lawrence Hamtil  on Monday, August 06, 2018

A few months ago, I wrote about the compelling case for pairing minimum volatility with momentum strategies in a "barbell" approach.  The idea, in a nutshell, was to create a 50-50 portfolio of Minimum Volatility & Momentum (rebalanced annually).  This balancing of two extremes would help limit the extremes experienced by each factor portfolio during certain cycles (think the tech bubble and its aftermath for momentum), making the ride much smoother for investors by reducing long periods of underperformance.   Read More