Notes From the Morningstar Investment Conference


This week, Morningstar held its annual Investment Conference. Attended primarily by financial advisers, the conference is notable for both its size and its mutual fund focus (though there were sessions on other topics). This week, I’ll share some of my notes and observations. You’ll see a few articles resulting from meetings I had at the conference in future issues of the AAII Journal.

One of the topics brought up was smart beta, or as Morningstar refers to it, strategic beta. These strategies emphasize certain risk factors (stock characteristics shown to have a return premium associated with them). Rob Arnott of Research Affiliates and Cliff Asness of AQR Capital Management both cited value and momentum as factors that lead to higher stock returns. Asness does not see value, momentum and low volatility as being “arbitraged away soon.” He wasn’t sure about profitability but described it as being interesting enough to look at over the long term. Though associated with a lower risk premium, he thinks the profitability factor is uncorrelated with value.

Arnott thinks investors should check “the price tag” of what they are buying since factors can become overvalued when too many people are using strategies based on the same risk factor. He observed that people tend to pile into what has worked recently and shift out of what has hurt them recently. Arnott described this pattern as a sign that even though investors know they should buy low and sell high, they don’t do it. Arnott then added that the essence of successful investing is fighting against human nature.

Read more »

More on

Not an AAII member? Join today

Highlights from the AAII Journal

AAII Sentiment Survey

Bearish sentiment rose to its highest level and neutral sentiment fell to its lowest level since February. Even with the big jump, pessimism remains within its typical historical range. More about this week’s results.

What’s Trending on AAII

  1. 16 Financial Ratios for Analyzing a Company’s Strengths and Weaknesses
  2. Why a New Allocation Approach Is Needed
  3. Using Cash and Short-Term Bonds to Avoid Taking Losses in Retirement

The Week Ahead

On Thursday, British voters will be asked, “Should the United Kingdom remain a member of the European Union or leave the European Union?” BBC News has a good article explaining the upcoming Brexit referendum.

We’ll get our first glimpse at second-quarter results as a group of early reporters step up to the plate. Among them are S&P 500 members Adobe Systems (ADBE), CarMax (KMX), FedEx Corp. (FDX) and Lennar Corp.(LEN) on Tuesday; Bed Bath & Beyond (BBBY) and Red Hat (RHT) on Wednesday; and Accenture Plc (ACN) on Thursday.

The week’s first economic report will be May existing home sales, released on Wednesday. Thursday will feature the June Purchasing Managers’ Manufacturing Index (PMI) flash and May new home sales. May durable goods orders and June consumer sentiment will be released on Friday.

Two Federal Reserve officials will make public appearances: Chair Janet Yellen on Tuesday and Dallas president Robert Kaplan on Thursday.

The Treasury Department will auction $26 billion of two-year notes on Monday; $34 billion of five-year notes on Tuesday; and $13 billion of two-year floating rate notes (FRN), $28 billion of traditional seven-year notes and $5 billion of 30-year inflation-protected securities (TIPS) on Wednesday.

Read more »

Investing the “AAII Way” has always been about distilling current financial theory and academic research into knowledge that our members can act upon. As a member of AAII, you’ll receive monthly updates on the holdings, performance and investment strategies behind our real-world portfolios. Free Guide–New members are rushed a special guide to our model portfolios, which includes the AAII Model Shadow Stock Portfolio with a 12.1% five-year annualized return (through 5/31/2016). This guide acts as an invaluable “cheat sheet” for those who want to quickly build a personal version of their own AAII stock or fund portfolio. Join Today.


Leave a Reply

Your email address will not be published. Required fields are marked *