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  • Dalbar Update: Investors Still Lagging The Market

    The Dalbar organization recently completed the 15th update of their landmark Quantitative Analysis of Investor Behavior (QAIB) Study. As long-time readers know, I have often quoted statistics from these annual updates that show average investors receive inferior long-term returns when compared to gains posted by stock and bond mutual funds. The reason, by and large, is that investors switch from fund to fund chasing hot returns. In doing so, they often end up with low returns, and sometimes even losses. Most interesting, however, is that the 2009 Dalbar QAIB Study update finally comes to the realization that traditional buy-and-hold approaches do not work, and that investors continue to panic and trade out of stocks when losses run high. In other words, emotions often trump rational investor behavior. This week, I'll update you on the most recent Dalbar Study findings, and also discuss our solution to emotional trading that we discovered back in 1995.

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  • On The Economy And Active Management

    Recent economic reports continue to signal an economy that is spiraling into a recession. How deep and how long that recession may be is anyone's guess, but I think it's beyond question that a major slowdown is in our future. Of course, this also means sluggish corporate earnings, a depressed stock market and a lower demand for goods and services. With trillions of dollars of wealth now devoured by the subprime monster, the natural question is how to invest in an uncertain market. Fortunately, we have the answer for you as I will explain this week after reviewing some economic data. This is not an E-Letter that you'll want to miss....