Cullen Roche at Pragmatic Capitalism has been doing “Three Things I Think” posts for some time now, the most recent being about the risk of recession. Below are some items that I wanted to highlight that merit more attention than a link in a linkfest but don’t rise to the level of a full-blown blog post.
1. The Swensen Portfolio
David Swensen and his approach to portfolio management was one of the first topics I covered here on the blog. Back in 2011, I examined the performance of a portfolio based on his asset allocation recommendations to individual investors. William Ehart at Humble Dollar has re-run the numbers up to the present day. The bottom line is that it has performed a little bit worse a more conventional portfolio.
2. Financial Fraud
It it easy for the more cynical among us to look at the victims of financial fraud and wonder: what could they possibly have been thinking? I would argue that this is simply not fair. Fraud, in all its forms, is old as human history. It is naive to think it could ever been eradicated. This story from Australia about how dating sites were being used to entice people to trade highly leveraged derivatives is a new one, however. As always, be on guard for potential fraud. Lesley Gregory at TEBI has a handy 7-item list to help protect you from potential financial fraud.
3. The Behavior Gap, redux
I highly recommend this post, Mind the Gap? Rethinking the Investor Gap Equation, by Jake at EconomPic Data on the so-called behavior gap. This is a topic that is highly controversial and emotional for some. Jake illustrates (correctly) how return gaps can be created by systematic behaviors, that no one would reasonably say represents “bad” investor behavior. In addition, he highlights how time-weighted returns are not directly comparable to dollar-weighted returns. In short, there is an apples vs. oranges problem underlying this who debate. Read it.