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Brad Tinnon

Articles of Interest

Throughout the week, I run across articles written by other people that may be of interest to you. This week, there are two articles I’d like to highlight.

The first article is from Larry Swedroe titled Top Firms Fail to Beat Passive. The evidence continues to pile up showing that firms who engage in market timing strategies in an effort to beat the market usually underperform. And it’s interesting because when you listen to active managers discuss their methods and strategies it all sounds very appealing. After all, who wouldn’t want to be in the market just before it goes up and then get out just before it goes down. The only problem: NO ONE CAN DO THIS CONSISTENTLY!! Larry’s article compares DFA funds, which are essentially passively managed funds which don’t attempt to market time, to two very large active funds. The two active funds have not beaten DFA funds in any asset class over the last 17 years, which goes to show why active management is often called a loser’s game. Full disclosure: my firm utilizes DFA funds for most client portfolios. 

The second article has a very similar theme to the first. The title of the article Go Short on American Stocks Says This $500 Billion Fund Firm says it all. Here we have yet another company, in this case Alliance Bernstein, making a prediction. In fact, they go so far to say investors should bet against U.S. Stocks and that emerging markets and Europe stocks will fare better. We’ve seen these sorts of predictions time after time, and they usually do not turn out well. As I’ve written before, even if people have accurate predictions, they don’t know when they will actually come true. And many investors miss out on gains or suffer losses by acting on this type of crystal ball advice.

Hope you enjoy!

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Brad E.S. Tinnon

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