Sound Advice

Can a psychic help me? Most assuredly, the answer is yes, if you also believe in the Tooth Fairy.   Yet these days there are continuing radio commercials for psychics that would have you believe they can lead you into the future.   One would hope that they could, especially because the sponsor is proud to let you know that they accept only 2% of all psychics considered for the job.   Even better is their offer of free service if you are not pleased with the experience.   The experience begins with a 20-minute session for which the cost appears to be only $20, but you can be sure that whoever is on the other end of the phone is skilled is spending considerable prep time and following up with a wide range of gross generalizations to keep you going. Much of this is likely to be amateurish attempts to provide psychological assistance for those in need.   The problem is that these people are not trained in any area other than running up the clock.   Psychi...

How many investors have outperformed the stock market over the last 20 years? Very few investors have outperformed the stock market over the past 20 years.   Data shows that only about 6% to 8% of actively managed equity funds in the U.S. beat the market over this period, with the vast majority—over 90%—underperforming the S&P 500 or equivalent broad indexes. Percentage of Investors Beating the Market Only 8% of equity funds investing in large companies managed to outperform the market over a recent 20-year span. About 94% of all domestic funds underperformed the S&P 1500 Composite Index from 2005-2024. Over shorter timeframes (5-10 years), typically fewer than 15-20% of fund managers beat the S&P 500, and performance persistence is rare. Why It Is Rare The S&P 500’s high returns have proven immensely difficult to beat, especially as indexing has become popular and markets have ...

How is the similarity between Germany in 1933 and the current turbulence in U.S. politics likely to affect the financial markets? The parallels between Germany in 1933 and current U.S. political turbulence may amplify financial market volatility, but there may be important distinctions.   In 1933, Germany's political upheaval and rise of authoritarian leadership fostered extreme market reactions—companies with political connections to the new regime outperformed the rest of the market, while general uncertainty and crisis sharply affected investor sentiment and economic stability.   In the current United States, political divisions, government shutdowns, and leadership controversies have triggered immediate market downturns, increased risk aversion, and surges in safe-haven assets like gold.   Even so, the scale and nature differ:   America retains robust institutional checks, and financial markets tend to rebound after periods of political tension. Those rebounds,...

Is a total market index fund a better choice than a broad portfolio of stocks?   A total market index fund is generally considered a  better choice for most investors  compared to attempting to assemble a broad portfolio of individual stocks, primarily due to superior diversification, lower costs, and simplicity. Total market index funds provide exposure to essentially all publicly traded stocks in a market (such as the entire U.S. stock market), including large-cap, mid-cap, and small-cap companies, thus reducing company-specific risk and the need for individual stock-picking skills. Key benefits of total market index funds: Diversification:  One fund can offer broad market exposure across thousands of companies and all major economic sectors, lowering the impact of poor performance from any single stock or sector. Low Cost:  These funds typically have very low management fees (expense ratios), which helps investors keep more ...

Private equity may be good for investors, but it's terrible for the companies involved.   The impact of private equity (PE) on companies is a polarizing subject, with strong arguments on both sides. Arguments That Private Equity Is Harmful for Companies: Increased Risk of Bankruptcy:  Companies acquired by private equity are about 10 times more likely to go bankrupt than those not owned by PE firms. Some studies have found a 20% bankruptcy rate among PE-owned companies, which is substantially higher than industry averages. Job Losses:  On average, private equity takeovers result in significant job losses, with a Harvard and University of Chicago study showing an average 4.4% decline in jobs two years after acquisition. High-profile examples like Toys R Us and Red Lobster involved massive layoffs and eventually bankruptcy under PE ownership. Heavy Debt Burdens:  PE firms frequently use leveraged buyouts, making ...

How does the resemblance of the current situation in the U.S. to the  events of 1933 in Germany affect the financial markets? The resemblance of the current situation in the U.S. the events of 1933 in Germany raises significant concerns for financial markets, primarily through heightened uncertainty, increased polarization, and risk of institutional instability -- factors that historically have led to market volatility and reduced investor confidence. Historical Market Reactions In 1933 Germany, the collapse of confidence in government and institutions led to drastic declines in stock prices, widespread business failures, and soaring unemployment. Political outsiders exploiting institutional weakness intensified market disruption; major corporations suffered, but some firms closely connected to the new regime profited temporarily as their share prices rose. Contemporary Parallels Today’s U.S. situation features similar political polarization and a loss of public trust in leadership...