Ritholtz on Why We’re Bad at Forecasting

Forecasts are unproductive, writes Barry Ritholtz in a recent Bloomberg article, and we should not make investment decisions based on them. Ritholtz offers a list of reminders for readers of “what we know about forecasts and predictions, and why they are so rarely right.” Here are some highlights: We’re generally bad at it. “Examples are everywhere,” Ritholtz argues, citing how data provides clear evidence to support our failings at economic forecasts, expectations of future technologies, and earnings estimates, “not to mention election predictions.” Ritholtz adds that “whenever you see someone forecasting their own behavior, what you are getting is a […]

Ritholtz on the Question of When to Sell Stocks

The decision of when to sell a stock, according to Bloomberg columnist Barry Ritholtz, is “perhaps the most overlooked and underappreciated problem in finance.” Ritholtz provides a list of questions for an investor to ponder when attempting to make what can be a difficult and complex decision. These include: What is the basis for the selling? In most cases, Ritholtz argues, clients cite news headlines or emotional reasons behind their desire to sell. “Experience teaches us,” he asserts, “that most of the news is old and is already reflected in stock prices and is not a credible reason to sell.” […]

Ritholtz on Bulls and Bears

To determine whether you harbor a bullish or bearish viewpoint, writes Bloomberg columnist Barry Ritholtz, requires that you consider the causes of the current stock market rally. Ritholtz, a self-proclaimed bull, offers a list of drivers in what he sees as the order of significance. Here are some highlights: Global economic expansion: “Monetary policy,” writes Ritholtz, “is being normalized; growth, employment and wages are mostly solid.” Earnings: Ritholtz points out that earnings are the underlying driver of stock prices and that they have improved in the U.S. and are recovering in emerging markets, Europe and Japan. Sentiment: While referring to […]

Ritholtz & Kaissar on Passive Versus Active Management

 In a recent online debate concerning active vs. passive investing, Bloomberg columnist Nir Kaissar and Ritholtz Wealth Management’s Barry Ritholtz offered a range of arguments and insights. Here are some highlights: Cost and performance: While Ritholtz believes investors should allocate a “big chunk” of their portfolios to index investing because of lower costs and better performance, Kaissar argues that active (primarily for those focusing on value, quality and momentum) isn’t necessarily more expensive than passive. Rather, Kaissar says, many active managers have outperformed passive but “kept the profits for themselves” by charging high fees. Both agree, however, that “expensive and […]

Ritholtz on the Challenges of Active Investing

In a Bloomberg article from earlier this month, columnist Barry Ritholtz outlines some of the benefits and challenges inherent in active investing. He cites the following “desirable goals” and some corresponding impediments to those goals: Alpha: outperformance versus a benchmark. “Of all the reasons to be an active investor,” writes Ritholtz, “alpha may be the most difficult to achieve.” He underscores the significant hurdle that both fund managers and individual investors face when attempting to choose benchmark-beating stocks. Expressive: investing toward a specific goal. An “unstated” desire of many investors is to “use their capital as an expression of their […]