A Closer Look at the Market Premium

Source: Morningstar Direct 2016, DFA Returns. 2.0 2016; US Market Premium is defined as the return on the US Market Asset Class minus the return on the One-Month T-Bill. The US Market Asset Class is the CRSP 1-10 Index from 1/1/1972 – 12/31/1978 and the Russell 3000 TR USD from 1/1/1979-12/31/2015. The One-Month T-Bill is the IA SBBI US 30 Day Tbill TR USD.

Source: Morningstar Direct 2016, DFA Returns. 2.0 2016; US Market Premium is defined as the return on the US Market Asset Class minus the return on the One-Month T-Bill. The US Market Asset Class is the CRSP 1-10 Index from 1/1/1972 – 12/31/1978 and the Russell 3000 TR USD from 1/1/1979-12/31/2015. The One-Month T-Bill is the IA SBBI US 30 Day Tbill TR USD.

This blog is the second in a four-part series on factors of return. To read the first blog in the series, click here.
 
A review of the historical results of the market premium may help provide advisors context for client conversations about performance. (The market premium is defined as the incremental return of a broad based market index over a proxy for the risk free rate.)
 
Over short periods we’ve observed a volatile U.S. market premium. The standard deviation of the U.S. market premium over one-year periods, rolling one month from December 1972 to December 2015, is 17.74%. The graph above helps illustrate the volatility of the market premium over time. Continue reading

Why You Are NOT Like Most Financial Advisors

Envestnet Compendum of Industry Trends, April 2015

Envestnet Compendum of Industry Trends, April 2015

With more than 300,000 financial advisors in America, why is it so hard to find good advice?
 
Let’s start with the fact that 60% of those calling themselves advisors aren’t even required to act in their clients’ best interests. And 70% still try to beat the market, even if few are ever consistently successful.
 
However, if you work with Loring Ward, chances are you are a different kind of advisor, someone who strives to provide the consistent, caring, comprehensive and knowledgeable advice that investors need.
 
And that makes you a rarity. Continue reading

Evaluating Factors of Expected Return

Blog_Evaluating_FactorsThis blog is the first in a four-part series on factors of return.
 
Research has identified approximately 316 new factors in the academic literature from 1964 through 20131, so how can we be sure that the factors above are the ones we should be using to construct our portfolios?
 
To review, factors are independent variables in an equation, or model, which help to explain asset prices. In the seminal Fama-French three factor asset pricing model, the three variables, or factors, are the market premium, the small premium and the value premium. These premiums are represented in the model as follows:
Continue reading

“The Talk”

Blog_The_TalkAre your clients prepared to have “the talk” with their kids? No, I’m not talking about the birds and the bees — I’m talking about encouraging your clients to kick-start an honest conversation with their children about their wishes as they get older and how all of it relates to their journey through retirement. Continue reading

Falling Back in Love with International Stocks

Blog_PP_FebThis blog is from the February issue of Portfolio Perspectives.
 
The international stock markets have underperformed U.S. stock markets for three straight years.1 China came out of the gate in 2016 like a lead balloon, causing other markets in Asia to decline as well. To make things worse, China devalued its currency, possibly signaling a pessimistic view of their economy and putting pressure on European countries to do the same.
 
Continue reading

Are You Prepared for the New Fiduciary Standards?

After years of intense debate, on January 28 the Department of Labor (DOL) advanced its conflict-of-interest fiduciary regulations to the Office of Management and Budget (OMB) for final review.
 
These rules change the definition of a “fiduciary” under the Employee Retirement Income Security Act of 1974 (ERISA) to expand upon who will be subject to strict fiduciary standards and prohibited transaction rules under ERISA and the Internal Revenue Code. As such, they will have a significant effect on those who recommend or market investment-related products and services to “retirement investors” in employee benefit plans and individual retirement accounts. Continue reading