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Pragmatic Capitalism

Practical Views on Money, Finance & Life

‘Investment Strategy’

Understanding the Art of Doing Nothing

strategy

Most of what we end up doing in our lives is determined not by what we decide to do, but by what we decide NOT to do. In the course of any given day we decide not to do millions of things. Eliminating all of these actions results in a direction that determines how we… Read More

How Do Indexers Do Better Than Average?

myth

One of the more common investing myths is the idea that indexing is necessarily “average”.¹ It makes sense at first. If you bought all of the stocks in the market then you’d generate the average return.  It would be like playing fantasy football and picking all of the players in the NFL. You would lose… Read More

Why I Prefer to Think of Stocks as Bonds

strategy

Bonds have always struck me as fairly simple instruments. In general, you know what a (high quality) bond’s return will be and you know what its time horizon is. That makes investing in fixed income instruments much simpler than investing in stocks. After all, the most difficult part about the stock market is that you… Read More

The Alpha Paradox

strategy

Here are a few things we know about the financial markets: Beating the market or obtaining “alpha” (excess return) is extremely difficult as evidenced by the annual SPIVA Scorecards. Alpha doesn’t exist in the aggregate because we all hold what sums to one portfolio wherein we earn the after tax and after fee return of… Read More

How to Avoid the Problem of Short-Termism

strategy

If I had to pinpoint the biggest problem for most asset allocators I would probably say short-termism.  Short-termism is the tendency to judge financial markets in periods that are so short that it results in higher fees, higher taxes and lower average performance.  We’ve become accustomed to judging the financial markets in quarterly or annual periods… Read More

The Perils of the Safe Income Illusion

strategy

Here’s Josh Brown with a good piece on dividends. He asks, “are we too obsessed with dividend income?” Tricky question, but I would tend to answer by saying that, when we substitute equity income for bond income, we’re often searching for “safe income” in all the wrong places. As I noted in a recent piece, corporations… Read More