Stock Picks for the Level-Headed Investor

When buying stocks, it is essential for investors to value process over outcome, says guru James O’Shaughnessy during a recent speaking engagement. This according to a recent Nasdaq article by Validea CEO John Reese. O’Shaughnessy shares a cautionary tale of a client who would knee-jerk when the market rose or dipped, often buying or selling based on emotion rather than on fundamentals. He stresses, writes Reese, how this practice will “get you into trouble, since by the time you want to buy in most of the easy gains have been made and, conversely, once you decide to sell most of […]

Greenblatt Blends Active and Passive Strategies in New Fund

Joel Greenblatt, managing partner of Gotham Asset Management, may have figured out a way to make active strategies appeal to passive investors, according to a recent article in Forbes. The legendary investor and author of The Little Book that Beats the Market (2010) has started a new fund called the Gotham Index Plus Fund that seeks to bend passive an active management strategies by tracking the S&P 500 and using it, the article says, as an “overlay strategy to build a long/short exposure based on Gotham’s value models.” The article outlines a recent interview with Greenblatt. Here are some highlights: […]

The Realities of Pretend Investing

At the end of November, The New York Times ran an article by columnist and CFA Carl Richards that addresses how the tendency to invest based on emotion rather than reality can be dangerous to the investor. Richards contrasts “pretend” versus “real” investors as follows: “Pretend” Investors “Real” Investors Are drawn in by what they see and hear on television. Would never make an investment decision based on television news. Think it makes sense to change investments based on events such as presidential election, Fed moves, etc. Change investments solely on what happens in their own lives, such as shifting […]

Adding Momentum to Your Portfolio

The tendency of recent market performance to persist, an effect known as momentum, has been pervasive even though it is a “blatant violation” of what you would expect in an efficient market. This according to Alex Bryan, director of passive strategies research for Morningstar, in a recent interview. Bryan explains that extensive research has uncovered three theories behind this: Behavioral biases. Investors may underreact to new information because they “anchor” their investment strategies to old information. This can cause market prices to react more slowly than they should. Investors are reluctant to sell stocks that have decreased in value. Instead, […]

How to Win in the Market: Look Up

It may sound like a mother’s mantra to her tech-obsessed teenager, but turning off your computer and putting away your smartphone might be the ticket to triumph in the market. This according to Mark Hulbert, founder of The Hulbert Financial Digest, in a recent MarketWatch column. Hulbert cites study results published this month by the National Bureau of Economic Research that found performance by those traders who pay the closest attention to the stock market’s “short-term gyrations” to be significantly lower than those who pay infrequent attention. The study’s authors explain that the traders most focused on short-term market movements […]