The Stingy News Weekly (06/06/2015)
New from StingyInvestor
Value investing is far from dead
"'Bring out your dead!' is the corpse collector's refrain at the start of a classic scene in Monty Python and the Holy Grail. In the movie, the collector encounters a customer who wants to dispose of a body that's, well, not quite dead yet. I was reminded of the scene when reading Ian McGugan's piece in ROB Magazine on the looming death of value investing. Just like the customer in the movie, I think he was little too eager to consign the time-tested strategy to the grave." [$]
False assumptions by Ontario pension planners
"I believe that Canadians are reasonably well prepared for retirement. Most save more than the 5 percent household saving rate. Most can retire comfortably on less than the traditional 70 percent replacement target. The greatest challenges come early in their adult lives when the burdens of acquiring a home and supporting young children strain the family budget. After that, things get easier." [Retirement]
Woe betide the value investor
"Alas, the fund manager's profession is abysmally depressing. You are regularly reminded by academic research that, on average, you destroy value, net of fees; a monkey randomly selecting stocks, or a cap-weighted index, outperforms you. (Sort of makes you question the value of your MBA degree and CFA designation.) Nor are the select few who have delivered long-term outperformance spared. New evidence suggests that your clients' decisions undo your work, so that, in the end, your contribution to their financial well-being is still quite negative. Your time-weighted returns may be superior, but the dollar-weighted, net-of-fee returns the clients actually receive are nonetheless adverse." [Value Investing]
"Value investing is viewed as a historically successful investment strategy. The literature generally agrees on the robustness of the strategy but disagrees on the explanations for the success. While the empirical research focuses exclusively on the time-series returns - or the buy-and-hold return - of a value portfolio, the investor experience is, of course, driven by the internal rate of return (IRR) - or the dollar-weighted average return. Although the buy-and-hold average portfolio return may be the proper way to document the anomaly, the dollar-weighted average return can shed light on some interesting questions which cannot be addressed by analyzing the buy-and-hold returns. In particular, examining the dollar-weighted returns allows us to ask whether investors have actually generated superior IRR consistent with the reported buy-and-hold outperformance of value strategies." [Behaviour]
"While the popular perception of millionaires is that they are more ostentatious than frugal, recent research shows that single-digit millionaires, at least, are generally far more mindful about how they save, spend and invest their money." [Thrift]
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