Wednesday, November 4, 2015

Academic Based Investing

Here at Legacy Financial Group we have always been proponents of academic based investing.  Our goal is to design portfolios based on what we know from academic research and empirical data about how markets work and where returns comes from.  As a result of this philosophy we have used mutual funds from Dimensional Fund Advisors (DFA) as the core of most of our portfolios.  They have a long history and strong foundation in building investment vehicles that maximize the use of our knowledge of financial markets.  Below is a video highlighting the academic pedigree of DFA and some of the key academic finding that are incorporated into all their funds.

Wednesday, June 24, 2015

And The Winner Is....

The best performing developed market of the past 20 years will come as a surprise to most.  The fact that an investment in this country nearly doubled the return of the US during this time will be even more surprising.  But the most interesting aspect about this country's performance is how it became the best performing developed country over the last two decades.

Thursday, April 23, 2015

Understanding Investor Bias: International Markets Edition

Last year was a very clear example of how investors can be blinded by biases.  2014 was unique in that most major equity markets performed well below average except for the U.S. large cap market (as measured by the S&P 500).  The S&P 500 was up 13% last year while international markets were negative and very little else returned more than about 4%.  Many investors immediately became nervous over their portfolios.  Some even mulled over the idea of completely getting out of anything outside the U.S.  There were a lot of strong reactions to just a single year of performance.

Every year out of all the major assets classes there is going to be a top performer and a bottom performer.  It is rare that anyone ever questions why they did not own only the top performer.  No one knows which asset class will be the best performer on any given year, and it is universally agreed that diversification can help reduce risk and increase long term return.  So why did last year seem to get some investors so riled up?