Advice for Buy-and-Hold Investors

Posted by Peter on July 28, 2015
Posted in: Investing. Tagged: , , .

This post provides investment advice for people who are only willing to devote a few hours per year to managing their assets. I will assume that you have a brokerage account in the U.S., but people in other countries ought to be able to follow the advice with modest changes.

Table of Contents

Recommended Portfolio


Here are my suggested investments (all are etfs):

Weight Symbol Description
25% IDLV Developed markets low volatility
20% XSLV SmallCap Low Volatility (US)
10% EELV Emerging markets low volatility
20% PDN Developed Markets ex-U.S. Small-Mid Portfolio Fundamentals Weighted
10% PXH PowerShares FTSE RAFI Emerging Markets Fundamentals Weighted
10% PRFZ FTSE RAFI US 1500 Small-Mid Portfolio Fundamentals Weighted
5% CSD Spinoffs

Caveat


I recommend that before setting out to beat the market, you worry about whether you’ll be able to do as well as the market. The typical investor does worse than the market averages, usually due to buying more when the market is high than when it is low. Take a few minutes to imagine that you will be influenced by the mood of other investors to be pessimistic when the market has been doing poorly, and optimistic when the market has been doing well. Also imagine that you will have more money available to invest when the market is high than when it is low. If you’re confident that you can avoid these problems, please stop reading this post – you’re either good enough to not need my advice, or deluded enough that you ought to start somewhere else.

Isn’t the market perfectly efficient?


The efficient market hypothesis is an approximation that is good enough for many purposes, such as telling you that you shouldn’t be confident that you can beat the market by much unless you’ve got a really good track record [1].

Many people infer from this that any effort to beat the market will be wasteful. Why do I disagree?

The simplest answer is that if there were no inefficiencies in the market, the people who are making the market efficient wouldn’t have incentives to continue doing so.

But that tells us little about how large and hard to find the inefficiencies are.

The cost of short-selling is one measurable obstacle to efficient markets. The average fee charged (to institutional investors) for shorting stocks seems to be around 0.5% to 1% per year. Stock market inefficiencies seem to be highly concentrated in stocks for which the fees are much higher than average [2]. These are clear symptoms of bubble-like behavior in some stocks, which rational investors won’t fully correct. (There also seems to be undiversifiable risk associated with shorting those stocks, which limits the market efficiency further). [2] appears to suggest that simply avoiding stocks with high shorting fees would have increased returns to index fund investing by over 5% per year. I don’t currently see a practical way for typical investors to directly exploit that specific evidence [3], but my recommendations should enable you to buy fewer of those overpriced stocks.

The causes of those bubble-like overpricings seem fairly stable over time. There’s lots more money being invested by unsophisticated investors than by investors with the skill to make the markets more efficient. There is some tendency for the best investors to get control over more money, but that is limited by the difficulty of recognizing expertise and by diminishing returns to larger investments.

Note that most fund managers are experts at something. But that something is typically some form of “doing what the customer asks”, not beating the market. Amateur investors who try to pay experts to beat the market usually fail by mistaking luck for skill.

Note that my advice is almost entirely about avoiding bad investments. Finding underpriced stocks is more time-consuming and easier to get wrong.

Diversify


Diversifying across countries reduces some hard-to-measure risks. One of the most thoughtless mistakes investors make is to invest mostly in stocks of their own country, when it makes more sense to underweight the country whose economy their other income is most correlated with. Betting on one country might make some sense if you have good reason to think it will do better, but you’re more likely to do it for signaling purposes or due to availability bias.

Fundamental Weighting


A standard index fund holds stocks in proportion to the market capitalization, which means that when a stock is in a bubble it is overweighted within that fund.

Weighting holdings by fundamental information is one way around that problem. Value stocks (those with low price/book value, low price/earnings, high dividend yield, etc) have outperformed by 2 – 4 percentage points [4].

There are a bunch of funds which implement this somewhat well. Book value and dividends are solid choices to use. Investors pay enough attention to price/earnings ratios that I expect those to be less valuable. Price to cash flow (or free cash flow) ratios provide evidence similar to price/earnings ratios; with fewer investors using them to reduce market inefficiencies, I expect them to work better. I don’t recommend using revenues as an indicator [5].

I have more confidence that fundamental weighting will outperform the market over long time periods than I do for other strategies. But I expect an investor with some risk tolerance should aim for higher returns, and use a diversified set of strategies that are slightly riskier but more promising.

Low volatility

Low volatility stocks have outperformed high volatility stocks by 5-10 percentage points [6].

I expect low volatility stocks to continue outperforming the highest volatility stocks. One factor that keeps investors in high volatility stocks is that they care about relative performance more than absolute gains. People are bothered at least as much by underperforming when the market is at its best (which is when low volatility stocks underperform, and also when people are most actively talking to peers about their performance) as they are by losses in a bear market. Also, stocks that are in a bubble have high volatility. Finally, people have some bias toward investing in stocks that make good conversation topics at parties, and low volatility stocks are harder to turn into interesting conversation.

Small Cap

Small-cap stocks have outperformed large-cap stocks by 3 percentage points [7].

Maybe that is due to the tendency of bubble to move the stocks they affect into larger capitalization categories. Maybe it’s due to neglect by large investors, who avoid them because it’s hard to buy large enough stakes to be worth their attention (e.g. Warren Buffett has most of his wealth in chunks of stock worth over $1 billion). Maybe it’s due to the popularity of S&P500 index funds. I’m less confident about these forces remaining important than I am for the previous two ideas, but even if they eventually diminish they’re still important today.

Spinoffs

Companies spun off from a parent company have outperformed by about 15 percentage points in their first year. Unfortunately, the etf that invests in spin-offs doesn’t buy them until 6 months after the spin-off, and holds them for about two years, which suggests it should outperform by more like 5 percentage points if spin-offs continue to do as well as before this pattern was publicized [8].

I don’t think many investors are paying much attention to the spinoff performance gap yet. Some factors that might maintain the inefficiency are that etf’s, mutual funds and trust funds are reluctant to change their investments at irregular times, so they end up delaying purchases of spinoffs for months after the spinoff happens. Anyone who invests based purely on quantifiable fundamental and/or technical data about an individual stock will often delay buying spinoffs due to lack of data.

Low corruption


That’s it for my official list of recommendations. But I’ll mention some other ideas that you should consider if you have enough time and wealth to justify a more complex portfolio.

I invest a modest amount of my money in low corruption countries. This approaches is only supported by my intuition. Historical data for the 6 best countries for which etf’s were created in 1996 doesn’t confirm the value of this idea. I suspect that if risks of political harm to markets were to increase, this strategy would be valuable, without causing much harm in other conditions.

I don’t see signs that investors have much awareness of which countries are less corrupt than the U.S., much less a desire to shift investment toward those countries. If markets are pricing them efficiently, it’s likely due to something indirect such as investors in those countries having more confidence in equities.

I view the low corruption strategy as more of a risk-reduction strategy than a high expected value strategy.

Here are etf’s of the 10 countries [9] ranked best in Transparency International’s Corruption Perceptions Index:

Leverage


I have typically used leverage of somewhat more than 1.5x, but I currently have essentially no leverage. That’s partly because stocks are less cheap than average, and partly because I’ve become more risk averse as my wealth increases and my ability to get a job doing something else decreases.

Using leverage (typically by buying on margin) is often valuable, but I’m reluctant to advise people to use it. One concern is that people are most likely to start using margin near market peaks, and ignore advice to use margin when it’s most valuable.

I’d like to recommend buying on margin when stocks are not overpriced based on a simple measure such as the Cyclically Adjusted PE Ratio (which should indicate buying on margin is safe when it’s below about 20), or the market capitalization to gdp ratio. I’m unsure whether this ought to be measured for the world as a whole or for each region corresponding to individual etf’s.

However, due to some combination of stock prices being high and the data not meaning quite the same thing as it used to, it seems unlikely that any rule I suggest will justify using margin in the next year or two, so I’m not going to suggest any rule now.

If you buy on margin, beware that margin rates vary a lot between brokers (and maybe from customer to customer at each broker – brokers with high rates are reportedly willing to negotiate).

Interactive Brokers has low margin rates. But their system is designed for experienced traders, and most investors will find it confusing and hard to use (e.g. their warnings about margin calls only provide a few hours notice, as opposed to 3 days with most brokers, and it takes fairly detailed knowledge of margin regulations to figure out how to avoid forced sales).

I don’t know much about etf’s that implement leverage. I have little interest in them because I haven’t seen any of those that implement strategies such as low volatility or fundamental weighting.

Brian Tomasik has written more on this subject than I’ve been willing to read. See also Paul Christiano’s comments on risk aversion.

Alternatives to stocks

Bonds have some value as a way to diversify. They do well at times when stocks are doing poorly, which means they reduce your risk while also providing profits at times when investing those profits in stocks is most valuable. But you’ll probably won’t rebalance your bond profits into stocks when stocks are unusually low. Also, bonds are probably overpriced today because recency bias causes us to overestimate the benefits of declining inflation and underestimate the risks that bonds will do terribly when inflation rises. Inflation is currently low enough that there’s no way for the benefits of further declines in inflation to balance the risks that bonds will suffer from high inflation. Bonds have underperformed stocks by several percentage points over the past century, so even if this was as good a time as is typical to buy bonds, risk-tolerant investors won’t invest much in bonds.

Real estate is a popular alternative to stocks. Directly investing in it has the disadvantages of illiquidity and (unless you’re very rich) requiring you to bet on one location. So it seems better to invest in stocks of companies that own real estate. I have no opinion on whether it is wise to weight real estate stocks more heavily than do the etf’s that I recommend. WPS (iShares International Developed Property etf) looks worth considering.

Digital money-like entities such as Bitcoin and Ripple XRPs are a reasonable place to put small fractions of your wealth, provided you can protect them against theft. I currently have less than 0.1% of my wealth in Bitcoin and XRP. The most popular ones will have some tendency to outperform the obscure one. Beyond that I have little insight to offer.

You should hold some cash or money market funds for emergency use and routine spending. It makes little sense to hold more than that unless you are wise enough to identify a stock market bubble.

A mutual fund that tracks an index is almost as good as an etf, but mutual funds tend to have higher costs and hidden problems due to only using end-of-day pricing. I haven’t done a careful comparison of the mutual funds that are most similar to the etf’s I recommend.

Concluding Remarks


Some of these etf’s are less heavily traded than well-known investments, so they have less liquidity. When you place buy orders for them, use limit orders, not market orders, and set the limit price a little bit above the midpoint of the bid and ask prices.

The only ongoing changes I suggest making is to rebalance your holdings about once a year to bring them back in line with the suggested weighting. That will create a small tendency to move money away from investments that are experiencing bubbles and into neglected investments.

All of the approaches I’ve mentioned are likely to outperform by less than history suggests, due to the increased amount of investment attempting to exploit them. That increased investment over the past decade or two doesn’t look large compared to the magnitude of the inefficiencies, but if trading volume on these etf’s becomes comparable to that of leading etf’s, I’d expect the benefits of these etf’s to go to zero.

My expectation is that these investments will outperform the market over the next decade or so by something like 3% per year. That should offset your tendency to buy when the market is high, and enable you to at least match market returns.

Disclaimer: I currently hold positions in these symbols: XSLV, CSD, EWSS, EWD, and ENZL.

[1] You should also doubt your ability to evaluate your track record. It is quite normal for a bad strategy to produce what looks like a good track record for a year or two.

[2] http://ssrn.com/abstract=2387099.

[3] Although an experienced investor could come close with an account at Interactive Brokers and a good deal of work.

[4]Antti Ilmanen, Expected Returns, chapter 12.

[5] For example, revenues give a distorted comparison between Google and Amazon because Amazon because most of the value of Amazon’s revenues comes from whoever made the products that Amazon sells; Google creates a much higher fraction of the value of it’s revenues.

[6]Eric Falkenstein, Finding Alpha.

[7]Antti Ilmanen, Expected Returns, chapter 3.

[8]Predictability of Long-term Spinoff Returns, John J. McConnell and Alexei V. Ovtchinnikov.

[9] Excluding Luxembourg, which doesn’t seem to have an etf.

20 comments on “Advice for Buy-and-Hold Investors”

  1. Your expectation is that this portfolio will beat the market by 3% over the next decade?

    Beating the market by 3% is not really “beating”. It’s *absolutely crushing*. Like, you’re-the-legit-Bernie-Madoff kind of crushing. I believe that overweighting in small-caps and emerging markets might generate these kind of returns under the right conditions. I also suspect they would underperform by 3% in fairly typical bad conditions, whether the funds were “low volatility” or not.

    This looks like a portfolio designed to take advantage of high volatility, in fact. Which might be a great portfolio for a sensible, informed buy-and-hold investor, but that portfolio would probably need a hefty bond or cash-equivalent portion that gave you the ability to re-balance during frequent, significant dips and surges.

  3. Re: https://www.reddit.com/r/investing/comments/3mn26x/is_this_bayesian_advice_for_buyandhold_worth/:

    Diversity wasn’t my top goal here. I highly recommend diversity when it’s available at virtually no cost (e.g. internationally diversified funds instead of funds that focus on whatever country you happen to live in).

    I haven’t found much reason to worry about modest deviations from optimal diversity when I’m pursuing strategies that are designed to be low risk. For the low volatility and fundamental weighting strategies, I believe they have a tendency to underweight stocks that will crash, which offsets the risks associated with moderately lower diversity.

    Still, I should have looked at the industry weightings, and if I had done so, I would have suggested somewhat different weightings: less XSLV, and more PDN. 15% XSLV and 25% PDN would bring finance down from about 34% to about 32% according to the numbers that TheLateOne provided, without sacrificing the benefits that I’m looking for.

    Have you got the grit (or apathy perhaps) to walk away from your portfolio for years at a time in order to maximize your long term returns?

    That is close to a key question. My post was designed for people who, at most, rebalance their portfolio once or twice a year to ensure that one of the funds doesn’t grow into an unusually large fraction of their portfolio. (I expect such rebalancing to be desirable, but not very important, for people who are following the strategy I suggested here). Such investors shouldn’t try to analyze industries.

    There are lots of people who think they can do better, and that they can evaluate individual industries and select ones that are safer and/or likely to outperform. Most such people will be wrong, and won’t follow the advice I have here.

    I’m unclear whether TheLateOne believes that he or she knows better how to pick industries than automated strategies for low volatility and fundamental weighting. The strategies have good long-term track records. I don’t see a track record for TheLateOne.

    I consider it quite reasonable to believe that this is a good time to overweight banks and real estate. The problems of 2008 are still fairly vivid in the minds of enough people that banks and real estate companies are less likely than normal to take the risks that they took in 2003-2007. And investors are likely being cautious about buying those industries due to those same vivid memories. I expect low volatility and fundamental weighting strategies to take advantage of such effects

    This fund focuses on spinoffs so presumably most of the alpha comes from a fund manager’s analysis of the deals happening.

    No, the alpha comes from a pattern of spinoffs being underpriced. It invests in all spinoffs that meet some basic constraints such as size and timing.

  4. Thanks for replying.

    I was already planning to use your advice, but the criticism, particularly the “actually it’s high-volatility” claim, gave me some pause.

  5. Thank you for making this post.

    You said, “Take a few minutes to imagine that you will be influenced by the mood of other investors to be pessimistic when the market has been doing poorly, and optimistic when the market has been doing well. Also imagine that you will have more money available to invest when the market is high than when it is low. If you’re confident that you can avoid these problems, please stop reading this post – you’re either good enough to not need my advice, or deluded enough that you ought to start somewhere else.”

    I’m confused. For one, I think I can avoid the problems you mentioned. However, I don’t think I’m good enough to not need your advice, for I don’t know much about investment. However, I’m having a hard time believing I’m deluded, since in the past when the market did poorly or well in the past I had no temptation to change my investing strategy or do anything else harmful investment-wise, nor do I see any reason why I would have.

    Any thoughts to help me deal with my confusion would be appreciated.

  6. None of the stocks you recommend exploit all of the inefficiencies you mentioned, and I’m wondering why you don’t recommend investing in a stock that does. Is there no such stock? If so, why not?

  7. SRTQ,
    From what little information you provide about yourself, I’m guessing you don’t have enough evidence to justify being confident about what you’ll do. There are probably a few people who are exceptions to that heuristic, but there are a much larger number who are mistakenly confident in their abilities. Unless you have more unusual evidence about yourself than you’ve indicated, you should assume you’re in the latter group, and should therefore be more uncertain about how well you will follow a strategy.

    I expect that there’s no etf that combines all of these strategies. It’s easy enough for investors to buy several etfs, and plenty of differing opinions on which strategies to use and how to weight them, so I don’t expect there’d be lots of demand for a fund that combined multiple strategies.

  8. Peter,

    Thank you for the response.

    The issue with buying multiple etfs that exploit different inefficiencies is that I don’t see how it would have higher returns in expectation than buying just the one etf that exploits the most exploitable inefficiency (though I see how it would have lower risk). E.g. if you invest 50% of your funds into an etf that exploits inefficiency a and in expectation beats the market by 1% and you invest 50% of your funds into an etf that exploits inefficiency b and in expectation beats the market by 3%, then in expectation I think you would be the market by 0.5 * 1% + 0.5 * 3% = 2%. But if you instead invest in an etf that exploits both inefficiencies a and b by only purchasing a stock if that stock is underpriced due to both inefficiency a and b, then I would naively think I would have a return that beats to market in expectation by roughly 1% + 3% = 4%. There being correlations between the inefficiencies might make the etf that exploits both of them have a return that’s less than 4% in expectation, but I suspect it would still be much greater than 3%. That said, I have extremely little knowledge about investing, so this might be nonsense. Am I missing something?

  9. SRTQ,

    Yes, that explains a real advantage of combining strategies. Half of my recommended portfolio consists of etfs that combine a smallish-cap strategy with another strategy, and I would do more of that if appropriate etfs existed.

    But I’d still recommend a little diversification of strategies, for the same reasons diversification is good in general. I see that I didn’t do a good job of explaining the value of diversification – I recommend the second post in this thread for a good summary (and also a good description of how to evaluate leverage).

    There are sometimes technical difficulties with combining strategies – I suspect there are often no recent spinoffs with small capitalization, and if there were an etf that bought spinoffs within a month of when they started trading, they’d have a poor estimate of the volatility. But existing etfs aren’t pushing that limit.

    Robo-advisors sound like they might be able to implement the equivalent of a customized etf at a possibly affordable cost. I wasn’t familiar with them when I wrote the post, but I’m guessing that people who can afford to spend 20+ hours setting up a robo-advisor account should try using that to combine several strategies. (I’ve met someone from AntiGravity Investments, and I have a vaguely favorable opinion of them, but I’m unclear about whether they’re open to the public yet).

  10. Peter,

    Thank you for the information.

    But I’m confused about why people seem to be leaving so much low-hanging fruit unpicked.

    First, I don’t understand how these market inefficiencies that allow you to beat the market continue to exist despite being public information. Why don’t professional investors exploit these inefficiencies until they no longer exist? I understand that they are exploited to some extent once they are discovered, but based on what little research I found on the topic, they don’t seem to go away completely.

    Second, I still don’t understand why there doesn’t seem to be an etf that combines all of the strategies. I understand that due to diversification it probably wouldn’t be a good idea to invest *all* of your money in such a fund, and I understand that such an etf might not be able to exploit every single inefficiency all the time. But I’m having a hard time understanding why, despite there being thousands of etfs, not a single person tried making one that exploits all these strategies. Are the risks really so great, and the additional returns really so small, so as to make combining more than 2 strategies *never* worth it? Did people really think, “Hey, why try making an etf that exploits multiple scientifically-back market inefficiencies when an [etf for the fertilizer industry](https://www.kiplinger.com/tfn/ticker.html?ticker=SOIL) is so much more promising!?”?

  11. SRTQ:

    To your first question. That depends on the strategy. Something like the short anomaly discussed in this article can’t be arbitraged because it is risky. An institutional investor would have to take a very large position in these stocks to get rid of that risk, causing them to be underdiversified and thus subject to those stocks’ idiosyncratic risk.

    Regarding an “anomaly” like the size or value premia. There is very convincing theory and empirical evidence that suggest these reflect risk, not “mispricing.” Any failure of traditional model like the CAPM that were traditionally used to show these stocks earn “excess” returns will show up in factors like size and value. https://academic.oup.com/rfs/article-abstract/8/2/275/1589425 is one the original papers making this argument. It then becomes a very complex matter that takes a lot more thought to then decide if you should be overweighting your portfolio towards size/value. (If you are curious, I can expand on that)
    Examples of forces that can lead to size/value premia that are not due to mispricing:
    Stochastic volatility, tail risk aversion, dynamic changes in market-wide investment prospects, time-varying risk aversion

    Regarding your question on ETFs, there are many funds that focus on each individual one. Mutual funds trade on multiple of these sorts of premia. Again, though, there is CONVINCING empirical evidence that these are just types of risk. Thus, would I recommend my friend invest in these ETFs, rather than just a total-market index? Well, that will depends on their age, income, risk aversion, etc.

  12. I hope I’m not being annoying with my questions, here. But Eliezer Yudkowsky in *Inadequate Equilibria* wrote:
    “If I had to name the single epistemic feat at which modern human civilization is most adequate, the peak of all human power of estimation, I would unhesitatingly reply, “Short-term
    relative pricing of liquid financial assets, like the price of S&P 500 stocks relative to other S&P 500 stocks over the next three months.” This is something into which human
    civilization puts an actual effort.
    * Millions of dollars are offered to smart, conscientious people with physics PhDs to induce them to enter the field.
    * These people are then offered huge additional payouts conditional on actual performance—especially outperformance relative to a baseline.
    * Large corporations form to specialize in narrow aspects of price-tuning.
    * They have enormous computing clusters, vast historical datasets, and competent machine learning professionals.
    * They receive repeated news of success or failure in a fast feedback loop.
    * The knowledge aggregation mechanism—namely, prices that equilibrate supply and demand for the financial asset—has proven to work beautifully, and acts to sum up the wisdom of all
    those highly motivated actors.
    * An actor that spots a 1% systematic error in the aggregate estimate is rewarded with a billion dollars—in a process that also corrects the estimate.
    * Barriers to entry are not zero (you can’t get the loans to make a billion-dollar corrective trade), but there are thousands of diverse intelligent actors who are all individually
    allowed to spot errors, correct them, and be rewarded, with no central veto.
    This is certainly not perfect, but it is literally as good as it gets on modern-day Earth.

    I don’t think I can beat the estimates produced by that process. I have no significant help to contribute to it. With study and effort I might become a decent hedge fundie and make a
    standard return. Theoretically, a liquid market should be just exploitable enough to pay competent professionals the same hourly rate as their next-best opportunity. I could potentially
    become one of those professionals, and earn standard hedge-fundie returns, but that’s not the same as significantly improving on the market’s efficiency. I’m not sure I expect a huge
    humanly accessible opportunity of that kind to exist, not in the thickly traded centers of the market. Somebody really would have taken it already! Our civilization cares about whether
    Microsoft stock will be priced at $37.70 or $37.75 tomorrow afternoon.”

    It seems like Eliezer would disagree with your assessment that casual investors can predictably beat the market. I’m wondering what your thoughts on this are.

  13. Eliezer and I mostly agree: the pricing of stocks with large market capitalization is handled much more wisely than monetary policy or nutrition.

    But there’s a finite amount of money available to the best investors, and they’ve got a finite amount of attention. I’ve tried to focus on strategies that would take large amounts of money to eliminate the last percentage point of above-market returns. And I expect the best investors to mostly aim for strategies that are a bit more profitable than the ones I recommend.

  14. I understand you and Eliezer agree that stocks with large market capitalization are not mishandedled horribly. But you still seem to think one can crush the market by following a simple, publicly available strategy. And Eliezer seems to think that’s not possible, as signified by him saying “I don’t think I can beat the estimates produced by that process”. Am I right in that you two disagree about this? I’m not sure if MIRI owns any stocks, but if MIRI does and Eliezer is wrong, I think we should tell them.

  15. Peter,

    Thanks for this post, I found it really informative and helpful.

    Looking at your recommendations with the benefit of hindsight, they seem to have on average significantly underperformed the stock market over the last 5 years or so.

    Do you think that this is just variance and that over the long term these strategies will still outperform, or have you changed your mind about their edge?

  17. Thanks for all the links, interesting stuff.

    It does seem to me that Colby’s and your article are slightly outdated at this point. Both Russell 2000 and Russell 2000 Value have outperformed the S&P 500 in the past few months. So the gap between large growth stocks and small value stocks has narrowed a bit.

    At the same time XSLV and IDLV seem to have underperformed the Russell Index and still are below their pre-pandemic highs. Do you have any thoughts why this might be? I’d guess it has to do with the low-volatility factor.

    Also if it is true that a few large companies were overvalued at the end of summer and now most other stocks are catching up, does that imply the stock market is overvalued as a whole? Or do you think some macro factors have changed and the stock market is valued fairly?

  18. I expect low volatility funds to underperform when bubbles are inflating, and outperform when bubbles are deflating. I haven’t seen much deflating of bubbles.

    The stock market is overvalued in the sense that most market-cap weighted funds look expensive. I’m unsure whether it’s overvalued in the sense of a randomly chosen US stock being overpriced. I see plenty of cheap-looking stocks trading on the Hong Kong exchange, but I don’t know whether an ETF would enable you to buy those.

  19. I really like your guide. But is it applicable for Outside US traders?
    Because I’m Indian and I’m using Kotak Securities to trad in global stocks.

  20. Pingback: Upside-Down Index Investing Strategies | Bayesian Investor Blog

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