Wesley Gray, CEO and CIO of Alpha Architect, made this observation at last week’s Financial Analysts Seminar, an annual CFA Institute event hosted with CFA Society Chicago. He was referencing the ability of successful investors to stick with a strategy.
Gray raised the point as part of a discussion about factor investing. Factor investing is selecting investments based on certain quantitative characteristics such as a low valuation (value), higher relative returns (momentum) or a smaller market capitalization (size). He could have easily made a comment about any other investment strategy.
Pain in the world of investing is incurring a loss. It can be a drawdown, a drop in the value of your portfolio. It can also be the loss of upside returns. Even if your investment is appreciating in price, the perceived loss of not being in a better-performing investment can be discomforting. Either way, loss is a powerful driver of human emotions and decision-making. Psychologist Daniel Kahneman says the pain of a loss exceeds the pleasure of a gain by a measure of 2:1. Continue Reading »
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More on AAII.com
- The Case for Systematic Decision-Making – Wesley Gray explained how relying on models can help make you a better investor in this 2014 AAII Journal article.
- Oakmark Funds’ Long-Term Approach to Stock Investing – William Nygren discussed his firm’s disciplined, low turnover approach, which includes a five- to seven-year time horizon.
Highlights from this month’s AAII Journal
- The Individual Investor’s Guide to Exchange-Traded Funds 2017 – Our annual ETF Guide has been updated and enhanced with new features.
- Model Fund Portfolio: Two ETFs Replaced With Lower-Cost Equivalents – The new mid-cap and small-cap ETFs have lower expense ratios and lower trading costs than the funds they are replacing.
AAII Sentiment Survey
Pessimism surged, rising above its historical average for the first time in nine weeks. More about this week’s results.
- Bullish: 36.1%, up 1.7 points
- Neutral: 31.8%, down 9.4 points
- Bearish: 32.1%, up 7.8 points
- Bullish: 38.5%
- Neutral: 31.0%
- Bearish: 30.5%
View the Sentiment Survey.
AAII Asset Allocation Survey
Cash allocations among surveyed AAII members fell to their lowest level since January 2000. More about the latest results.
- Stocks and stock funds: 67.9%, down 0.9 percentage points
- Bonds and bond funds: 17.7%, up 2.7 percentage points
- Cash: 14.5%, down 1.8 percentage points
- Stocks: 33.8%, up 0.2 percentage points
- Stock funds: 34.1%, down 1.1 percentage points
- Bonds: 3.9%, up 1.3 percentage points
- Bond funds: 13.8%, up 1.3 percentage points
View the Asset Allocation Survey.
The Week Ahead
Though second-quarter earnings season is rotating to smaller companies, the calendar lists 33 S&P 500 member companies as being scheduled to report. Included in this group is one Dow component: Walt Disney Co. (DIS), which will report on Tuesday.
The week’s first economic reports will be June JOLTS report on Tuesday. Wednesday will feature the initial estimate of second-quarter productivity. On Thursday, the July producer price index (PPI) will be released. Ending the week, the July consumer price index (CPI) will be released on Friday.
Three Federal Reserve officials will make public appearances. St. Louis president James Bullard will speak on Monday. Minneapolis president Neel Kashkari will speak on Monday and on Friday. New York president William Dudley will speak on Thursday.
The Treasury Department will auction $24 billion of three-year notes on Tuesday, $23 billion of 10-year notes on Wednesday and $15 billion of 30-year bonds on Thursday.