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The Illusion of Safety: What “Low Risk” Really Means for Investors
The standard “low risk” asset is short term treasury bills. If you are holding investment assets to be the low-risk part of your portfolio, there is a good argument to hold the…
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Tulipmania Revisited: Separating Hysteria from History
I was in Holland last week, and the Dutch tulips are in full and magnificent bloom. The fields full of technicolor flowers, in a display so extensive and impressive that it seems…
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From Tangency to Barbell Strategy: What Smart Investors Actually Do
What if one of the most elegant ideas in investment theory turns out to be nearly impossible to apply in the real world? In previous posts, we developed a number of ideas…
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The Capital Market Line—Is it the Holy Grail?
In a previous post, we introduced the concept of the efficient frontier. The efficient frontier concept is frequently presented in a graph, such as the following. Capital Market Line Now comes the…
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Does Mean-Variance Optimization Help with Risk Management?
How many times have you heard, or said, “past performance is no guarantee of future performance” or something similar? SEC rule 482 explicitly contains the language “past performance does not guarantee future…
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Do You Know How You’re Influenced by Modern Portfolio Theory?
Almost everyone believes that you should diversify your assets – but there are different explanations about why. It is sometimes said (though how anyone would know is another story) that fish are…
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A Better Way to Index?
In the last post, we saw how market cap weighting systematically over-weights “expensive” stocks and underweights “cheap” stocks. Non-market cap weighting is a potential solution. Non-Market Capitalization Weighting Let’s look at a…
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Are Capitalization-Weighted Indexes (Like the S&P 500) Inferior?
Most financial advisors agree that it’s difficult to beat “the market”. It’s easy to define “beat the market” as generating an investment return (typically before tax, and typically ignoring transactions costs) that…
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Buffett Just Sold His Index Fund Position—Index Investing: Yes or No?
If someone came to you today and asked, “What’s the case for index investing?” what would you say to that person? In light of Warren Buffett’s recent sale of his Vanguard Index…
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The Rise of Index Investing—And Why You Should Care
The indexing approach to investing accounts for over half of US equity investments in 2025. Compare that to the 1970s, when it was almost non-existent. Among many investors and their advisors, indexing has…
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