Sound Advice

What would The Cheshire Cat in Alice in Wonderland have said about the ongoing situation in Iran?  And what would be the impact on the economy and the investment markets? “Ah,” said the Cat, appearing just enough to show a grin, “you’re wondering about Iran. A curious place to look for sense, don’t you think?” “It seems everyone is quite certain they’re right,” he went on, tail flicking in and out of existence. “And when everyone is certain, the path usually leads in several directions at once—which is to say, nowhere comfortable.” He blinked, slowly. “You see, power is a bit like a smile. Some wear it openly, some hide it, and some insist it isn’t there at all—even as it lingers.” “And the noise,” he added, ears twitching at distant echoes, “isn’t always where the meaning lives. The loudest voices rarely belong to those who must live with the consequences.” The Cat faded until only his eyes remained. “If you’re looking for clarity, I’m afraid you may be in the wrong stor...

What are the major risks of AI and how will that affect the investment markets? AI introduces new technological, security, macro, and market-structure risks, and those risks can both fuel an AI-driven boom and increase the odds that markets overshoot and then mean‑revert sharply. Major AI risk categories Cyber and security risk : Gen AI greatly lowers the cost and sophistication bar for attackers, enabling scalable AI‑generated malware, ransomware, and adversarial attacks on models. That raises tail risks around data breaches, operational outages, and integrity of financial systems. Model, data, and governance risk : Complex, opaque models create monitoring challenges, dependence on data quality, and significant model risk if governance is weak. Excessive trust in AI outputs can lead to mispricing of risk and crowded trades. Systemic and concentration risk : A small set of hyperscalers and model providers underpins much...

Is there a better investment alternative to market index funds, which are heavily weighted toward a few of the largest companies? There are several reasonable “better” alternatives if your goal is specifically to reduce dependence on a handful of mega‑caps while still owning a broad equity market. Main approaches that reduce mega‑cap concentration Equal‑weight index funds: Give every stock the same weight (e.g., Invesco S&P 500 Equal Weight ETF, RSP), which cuts the weight of the largest names and boosts mid/small‑caps. Fundamental/RAFI‑type indexes: Weight by fundamentals like sales, cash flow or dividends instead of market cap (e.g., FTSE RAFI 1000 and similar “Fundamental Index” strategies), which aligns weights with economic footprint rather than price. Multi‑factor indexes: Explicitly tilt toward value, quality, low volatility, and smaller size, with diversification constraints that limit any single stock or sector’...

What are the benefits and disadvantages of Robo Advisers? Robo Advisers are usually a low-cost, convenient way to get a diversified, rules-based portfolio, but they can be rigid, impersonal, and a poor fit for complex situations. Whether they’re an advantage for you depends on how much customization, tax work, and human judgment you actually need. ​ Main benefits Low fees and low minimums: Typical Robo fees cluster around about 0.25% per year, versus roughly 1% for many human advisers, and many platforms let you start with a few hundred dollars or less. Over long horizons, that fee gap compounds in your favor if the underlying portfolios are similar. ​ Automatic diversification and rebalancing: Most Robo Advisers build portfolios from low-cost index mutual funds or ETFs and periodically rebalance, so you stay aligned with a target risk level without manual trades. Some also offer automated tax‑loss harvesting and cash management, especial...

Will AI improve my investment results? AI can help your investing mainly by lowering costs, automating good behavior, and making information easier to process, not by giving you a magic “beat the market” button. Whether it improves your results depends entirely on how you use it and whether it reinforces, rather than undermines, a disciplined, index‑oriented plan. ​ Where AI can genuinely help Decision support: Well‑designed tools can nudge you toward better diversification, appropriate risk levels, and avoiding obvious mistakes, which can modestly improve long‑term outcomes. Some studies find AI models can forecast earnings changes and trading signals more accurately than human analysts in specific contexts, though that does not automatically translate into higher net returns for typical retail portfolios. ​ Automation and robo‑advisors: Automated services generally build low‑cost, diversified ETF portfolios and rebalance them for you,...

Why You Should Watch the Shiller CAPE Index   The Shiller CAPE Index is a long‑term valuation metric for stocks that compares today’s prices to 10 years of inflation‑adjusted earnings, and you should care because extreme readings have historically lined up with meaningfully different long‑run returns. What the Shiller CAPE Index is CAPE stands for  Cyclically Adjusted Price‑to‑Earnings  ratio, also called the Shiller P/E or P/E 10. It is calculated as: current index level divided by the average of the last 10 years of earnings per share, with those earnings adjusted for inflation. Robert Shiller popularized it to smooth out the business cycle noise that distorts the usual one‑year P/E. What it is trying to tell you By averaging a decade of real earnings, CAPE aims to say, “How expensive is this market relative to a normal level of earnings through a full cycle?” Higher‑than‑average CAPE has historically bee...