Photo by Matt Popovich on Unsplash
This is part two of a three-part series. Part one appears here and part three will appear next week.
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
This is the second in my series about what I’d like to see more and less of in 2021.
More evidence-based investors
The shift from active to passive over the past three decades has been impressive. According to this working paper by authors associated with the Federal Reserve Bank of Boston, passive investing in U.S equity funds increased to 48% in March 2020 from less than 5% in 1995.
I’d still like to see more investors abandon stock picking, market timing and trying to select outperforming actively managed mutual funds.
Why?
The evidence is so clear that doing so is an intelligent, responsible way to invest.
Less growth outperformance. More value and small outperformance.
Over the past 13 years, value stocks have significantly underperformed growth stocks. I’d like to see the reemergence of the value premium.
Many investors tilted their portfolios towards value stocks based on the research of Fama and French, who concluded that value stocks, and particularly small-value stocks, were likely to outperform growth stocks and the market as a whole over time.
There are many reasons for this underperformance and much debate over whether the value-stock premium is shrinking or even disappearing.
I don’t care. I want to see the reemergence of the value premium.
Why?
The research supporting the value premium is robust. I know many advisors who rely on it and fund families that have adopted it.
Without exception, they are impressive people who adhere to high ethical standards and base their investment philosophy on sound science.
Investors who followed their recommendations have been patient long enough.
I hope 2021 is the beginning of a sustained period of value outperforming growth.
More reform. Less food insecurity
We’ve known for some time that many Americans were not saving enough for retirement. But the pandemic has demonstrated how close millions of people are to poverty. By some estimates, almost 23% of all households are experiencing food insecurity. Approximately 13.9 million children live in a household “characterized by child food insecurity.”
We have a friend who works in the office of an elementary school. She has observed children hoarding food from lunch on Friday, because it will be their last meal until Monday.
In our polarized political environment, it’s unrealistic to expect the government to pass legislation that will address the core problems underlying this devastating situation.
Marketing Services For Evidence-Based Advisors...and a New Book!
We offer consulting services on how to convert more prospects into clients through Solin Consulting, a division of Solin Strategic, LLC.
We offer a full range of digital marketing services exclusively to evidence-based advisors through Evidence Based Advisor Marketing, LLC. You can see examples of our work here.
My new book:
Ask
How to Relate to Anyone
Is now available in all formats. For more information, click here.
Schedule a call with Dan here
My physician recently left private practice and went to work for the Veteran’s Administration. I told him he was fortunate to have access to the Thrift Savings Plan, which many believe is the best run retirement plan in the U.S. Among other low-cost options, it offers a series of lifecycle funds that are basically target-date retirement funds. The expense ratio of those funds is a bare-bones four basis points.
The Thrift Savings Plan is only available to governmental employees.
Here’s my proposal: Make it available to everyone.
Why should members of Congress enjoy the benefit of a world-class retirement plan that is far superior to the plans most taxpayers can access?
Employees who prefer plans offered by their employers could keep them.
For more information about marketing and branding opportunities with Dan’s book, Ask: How to Relate to Anyone, click here.
More Portfolio Building Topics >
This is part two of a three-part series. Part one appears here and part three will appear next week.