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Below are papers, articles and podcasts that were written or produced by the principals of Portfolio Solutions:
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Each quarter the principals at Portfolio Solutions hold a client conference call to discuss the economy, the market and investment strategy. Follow the link above to listen to previous calls.
Each year we analyzed four primary drivers of market returns: risk as measured by volatility, expected earnings growth based on expected long-term GDP, market implied inflation based on the spread between long-term Treasury Bonds and TIPS, and current cash payouts from interest and dividends on bond and stock indexes. These factors are used in a valuation model to create an estimate for risk premiums over the next 30 years. In a sense, these returns reflect in each asset class what the market is estimating will be a fair payment over T-bills at each level of risk. We use these return estimates to create asset allocations the best fit our clients needs.
There are good reasons to change the asset allocation in your portfolio, but a volatile stock market is not one of them. This short paper explains when a change to asset allocation is prudent. It also explains how to change your allocation if you become overly emotional during a down market.
Comparing exchange-traded funds to traditional open-end mutual fund can be complex, especially when it comes to costs. To ETF or Not to ETF is a guide to understanding the pros and cons of investing in one or the other, or both.
A short explanation of a novel index classification methodology. The article explains the difference between benchmark indexes and strategy indexes, and introduces Index Strategy Boxes that map the index product universe by categorizing funds based on the way an underlying index selects securities and weights securities.
Index investing is booming, and it is revolutionizing the way people manage their portfolios. Investors have become overwhelmed and confused with all the different index funds available. This paper examines the burgeoning index fund marketplace, and introduces a new categorization system that will help investors understand how various indexes are constructed and maintained, and if the new methodologies are right for them.
ETFs expenses have been increasing over the years as this once a no-frills low-cost 'market index' product has grown into a full fledged actively managed products based on 'strategy indexes'. The ABCs of ETF – Alpha, Beta and Cost examines the correlation between the complexity of strategy and rising index fund costs.
BUY THE NUMBERS research reports offer periodic highlights and insight into different areas of investment analysis and portfolio management. The purpose of our research is to educate and inform investors rather than to offer specific advice. Three reports are available annually in the fouth quarter.
> Economic Analysis PDF
> Asset Class Valuations PDF
> Asset Class Correlations PDF
The presidential election cycle asserts that major market changes can be predicted based on the U.S. presidential election cycle. We looked at the returns of the S&P 500 index from 1948 to the present to show how the cycle works. We also compare the returns of the Clinton and Bush administrations to show whether the cycle has been accurate over the last six years.
1/1/1999
How to use total market index funds to create tax losses in a personal account while avoiding a wash sale.
7/7/2000
How much should you pay for advice? Many advisors tout the virtues of low mutual fund fees and commissions, but that discussion rarely extends to their own fee. The average advisor charges 1% of assets under management, and that is a bad deal for investors.
10/12/2000
How much should you invest in the stock market? This article explains the asset allocation process step by step. It is a must read for all serious investors.
12/15/2000
History shows that most investors simply cannot handle the risk of an all-stock portfolio, all of the time. Bonds provide stability and safety of income.
11/19/2001
Predicting the market is never easy and never accurate. There are too many variables and too much uncertainty. Nevertheless, we must try to calculate expected returns so that we have a guide to use when planning a portfolio.
The price-to-earnings ratio (P/E) is probably the most often used S&P 500 valuation indicator.Peak earnings P/E uses that highest earnings number in an economic cycle to calculate P/E. Peak earnings allow investors to ‘look through’ economic downturns to the better prospects and higher earnings that lay ahead.
3/25/2002
Business is tough for the active mutual fund companies, especially since index funds are catching on with the public. Who can blame the trustees of active fund companies for trying to spice up the performance of their funds by using an assortment of reporting techniques?
9/1/2000
There is a growing disparity between asset allocations in individual 401(k) accounts and acceptable risk. This could lead to a disaster for employees and employers.
8/7/2001
Dimensional Fund Advisors (DFA) funds should be available to all investors, not just the clients of investment advisors.
