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Articles by Doug Grim
Factor Cyclicality: Buckle Up; It Could Be Quite A Ride!
Have you ever ridden a roller coaster in the dark? As you were getting situated, the attendant probably told you to fasten your seat belt and to hold on to the safety bar at all times. You felt confident you would feel good when the ride was over but knew some stomach-churning periods were along the way. Worse, since it was dark, you didn’t know when those tough moments would come, how long they would last, or how dramatic they would be. Your job was just to not panic and hold on.
Vanguard: Buckle Up For Factor Cyclicality
[This ETF Industry Perspective is sponsored by Vanguard.] Have you ever ridden a roller coaster in the dark? As you were getting situated, the attendant probably told you to fasten your seat belt and to hold on to the safety bar at all times. You felt confident you would feel good when the ride was over but knew some stomach-churning periods were along the way. Worse, since it was dark, you didn’t know when those tough moments would come, how long they would last, or how dramatic they would be.
Elephant In The Smart Beta Room
Some of my industry peers make compelling cases for factor or smart beta1 strategies. Their presentations showcase lots of data, often using hypothetical (back-tested) returns. Rarely, however, do they address the elephant in the room: costs. Yes, costs can be difficult to estimate. In addition to the expense ratio, there are other real-world implementation costs (e.g., bid-ask spreads, commissions, market impact) when pursuing any investment strategy.
Elephant In The Smart Beta Room
Some of my industry peers make compelling cases for factor or smart beta1 strategies. Their presentations showcase lots of data, often using hypothetical (back-tested) returns. Rarely, however, do they address the elephant in the room: costs. Yes, costs can be difficult to estimate. In addition to the expense ratio, there are other real-world implementation costs(e.g., bid-ask spreads, commissions, market impact) when pursuing any investment strategy.
The Elephant in the Smart-Beta Room
Some of my industry peers make compelling cases for factor or smart beta1 strategies. Their presentations showcase lots of data, often using hypothetical (back-tested) returns. Rarely, however, do they address the elephant in the room: costs. Yes, costs can be difficult to estimate. In addition to the expense ratio, there are other real-world implementation costs (e.g., bid-ask spreads, commissions, market impact) when pursuing any investment strategy.
A framework to evaluate factor-based funds
I love to barbecue outside on the grill. It hardly matters whether I’m cooking steak, pork, chicken, or ribs. But what does matter, for me, is the barbecue sauce. It has to taste distinctive. I like mine extra spicy. Not all barbecue sauces are the same. Some are vinegar-based; others are created with tomato or mustard. Some have paprika; others use red pepper. How do you pick the one you want? There’s no benchmark or standard. You read the ingredients; you choose what you like.
The key to using active funds: Setting client expectations
You may be one of those advisors who, despite the changes in the advisory profession, has largely kept your practice the same. That is, your investment value proposition is built around selecting active managers. You see little reason for your investment philosophy to change. It has worked well for you and your clients for a long time.
Category Archive for "Portfolio Construction"
For more information about Vanguard funds or Vanguard ETFs, visit advisors.vanguard.com or call 800-997-2798 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing. Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars.
Sponsored Content: Back-tested strategies: Real or random?
Have you ever seen a bad back-test? Investment professionals have been jokingly asking that question for years, and the answer remains the same: of course not. That is because no one will likely visit your office to discuss a new product designed to be smart beta, strategic beta, or what I'll call factor-based whose simulated history only offers mediocre performance. Why? Because few would buy it.
Vanguard: Back-Tested Strategies: Real Or Random?
[This ETF industry perspective is sponsored by Vanguard.] Have you ever seen a bad back-test? Investment professionals have been jokingly asking that question for years, and the answer remains the same: of course not. That is because no one will likely visit your office to discuss a new product designed to be smart beta, strategic beta, or what I'll call factor-based whose simulated history only offers mediocre performance. Why? Because few would buy it.
Back-Tested Strategies: Real or Random?
Partner Voice allows financial brands to connect directly with the Market Realist audience to provide educational information about investment choices. Each report is produced by the financial brand and approved for publication if our research team deems it educational and suitable for the Market Realist audience. Market Realist may receive payment or other compensation from these financial brands. The opinions that financial brands express in these reports are their own.
Back-Tested Strategies: Real Or Random?
Have you ever seen a bad back-test? Investment professionals have been jokingly asking that question for years, and the answer remains the same: of course not. That is because no one will likely visit your office to discuss a new product designed to be smart beta, strategic beta, or what I'll call factor-based whose simulated history only offers mediocre performance. Why? Because few would buy it.
Back-tested Strategies: Real or Random?
Have you ever seen a bad back-test? Investment professionals have been jokingly asking that question for years, and the answer remains the same: of course not. That is because no one will likely visit your office to discuss a new product designed to be smart beta, strategic beta, or what I’ll call factor-based whose simulated history only offers mediocre performance. Why? Because few would buy it.
How Do You Measure an Active Manager’s Success?
How Do You Measure an Active Manager’s Success? With the recent implementation of parts of the U.S. Department of Labor’s fiduciary rule, advisors are sharpening their pencils when it comes to performing due diligence on equity and fixed income holdings in their clients’ portfolios. The good news is that advances in financial research and technology have made it much easier to dissect individual funds, or even a combination of funds, in different ways (sector, country, factor, etc.).
How Do You Measure An Active Manager's Success?
With the recent implementation of parts of the U.S. Department of Labor's fiduciary rule, advisors are sharpening their pencils when it comes to performing due diligence on equity and fixed income holdings in their clients' portfolios. The good news is that advances in financial research and technology have made it much easier to dissect individual funds, or even a combination of funds, in different ways (sector, country, factor, etc.).
Sponsored Content: How do you measure an active manager’s success?
With the recent implementation of parts of the U.S. Department of Labor’s fiduciary rule, advisors are sharpening their pencils when it comes to performing due diligence on equity and fixed income holdings in their clients’ portfolios. The good news is that advances in financial research and technology have made it much easier to dissect individual funds, or even a combination of funds, in different ways (sector, country, factor, etc.).
Does your active manager pass the factors test?
With the recent implementation of parts of the U.S. Department of Labor’s fiduciary rule, advisors are sharpening their pencils when it comes to performing due diligence on equity and fixed income holdings in their clients’ portfolios. The good news is that advances in financial research and technology have made it much easier to dissect individual funds, or even a combination of funds, in different ways (sector, country, factor, etc.).
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