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Pragmatic Capitalism

Capital for Living a More Practical Life

‘Investing Basics’

Control What You Can Control

Vanguard has a timely reminder for investors – “cost is the new performance”.¹  We’ve entered a new era in the asset management business.  The era of low fees.  We now know definitively that paying high fees is hugely destructive to long-term performance.  You don’t don’t get what you pay for and you don’t get better… Read More

Assessing the Utility of Wall Street’s Annual Forecasts

It’s that time of year when everyone starts preparing for the New Year and Wall Street makes its 2016 predictions.  I’ll get right to the point here – these annual predictions are largely useless.  But it’s still helpful to put these predictions in perspective because it highlights a good deal of behavioral bias and some of the… Read More

What is Portfolio “Risk”?

The idea of risk is a rather confusing and nebulous concept in modern finance. The traditional textbook definition of “risk” is standard deviation or volatility. This is convenient for academic purposes because it allows us to quantify risk in a portfolio. But this is a flawed concept for several reasons: Volatility isn’t always a bad thing. In… Read More

Why Countercyclical Indexing Makes Sense

I am totally convinced that low fee indexing is the best way to allocate one’s savings (in fact, my entire company is based around this view).  But when it comes to allocating that savings in a specific manner there are virtually limitless options. We know that reducing your frictions is the only way to guarantee higher… Read More

Problems with the Short-Term

Earlier this year I spoke about the problem of “the long-term”.  This is the tendency for modern finance to emphasize a long-term view due to the fact that assets tend to perform well over the long-term. This is empirically true. If we look at the performance of stocks, bonds and the broader economy the performance… Read More

Indexing Really is the Future of Investing

John Bogle presented at this year’s Grant’s Spring Conference and made the argument for indexing as the way forward for investors. You can find his presentation slides here.  Jim Grant offered some push back from the “active” side which raised the question – is indexing superior to specific security selection and which is the way forward… Read More

Someone is Always Outperforming Your Portfolio

I have some bad news for you. Someone, somewhere has a portfolio that is doing better than yours is. It might be Warren Buffett or your neighbor or your worst enemy (the latter two are often the same thing). The thing is, when we put together portfolios we have to remember a few hard truths… Read More

What is “Cash” in a Brokerage Account?

The recent attacks on Charles Schwab from Betterment and WealthFront seem to prove a disturbing reality – many advisors simply don’t know what “cash” in a portfolio really is and its necessarily positive aspects.