Active vs. Passive: How to keep score of the ongoing debate

At the heart of the active versus passive management debate lays the theoretical underpinning that the average return of both actively and passively managed assets must equal the aggregate market, thereby making it a zero-sum game. Since the costs of active management typically exceed those of passive management, the average actively managed dollar will underperform the average passively managed dollar after accounting for costs (Sharpe 1991). Over the past few decades, this debate has inspired many Read more [...]

Gold: Its History and Recent Trends

During festivals such as Diwali, the demand for gold in India increases because it is considered auspicious.  Traditionally, people invested in physical gold bars, coins and jewelry.  However, after the introduction of the gold ETF, the option to invest in gold also became popular.  There was a huge growth in the assets under management for gold ETFs compared with ETFs in other asset classes. Investors purchased gold as a way to preserve value and hedge against inflation and recession.  Gold Read more [...]

A Lesson in Last Week’s Turmoil

The market action in US stocks and Treasuries last week, especially on Wednesday, may be an experience that many investors would like to forget.  On Wednesday volume in US treasuries set a record as yields collapsed, stocks nose-dived and VIX topped 30 after opening the week at about 20.  As horrifying, or exciting, as it was, there may be lessons buried in the numbers. Rarely does one specific event cause this kind of market turmoil; rather many sources of investor anxiety crowd together.  Read more [...]

REITs – A Mature Asset Class in the U.S. and Growing Interest Globally

Over the past two decades, real estate investment trusts (REITs) have emerged as a popular and efficient way for investors of all stripes to access the real estate asset class. Strong long-term total returns, combined with other key investment characteristics such as liquidity, high dividend yields, their potential to increase diversification and to hedge against inflation have contributed to the appeal of REITs. Source: S&P Dow Jones Indices LLC; Barclays Capital. Data as of Sept. 30, 2014. Read more [...]

Colombia — Innovation in Indexing

If the world were a simpler place, we would have one index per market. However, this is far from the case. Markets have multiple indices, and deciding which index provides the best exposure is no easy feat. This is especially true in developing markets like Colombia, where multiple indices are jockeying to be the “market benchmark.” Looking back at the early days of indexing, the formula for the Dow Jones Industrial Average (DJI) was as simple as aggregating the prices of the largest stocks Read more [...]

A Quick Look at SPIVA India

The SPIVA India Scorecard reports on the performance of actively managed Indian mutual funds versus that of their benchmarks, showing equal-weighted peer averages.  The mid-year 2014 scorecard, the latest SPIVA India report, has revealed that while active funds may be able to outperform their benchmarks in the short term, it becomes more likely for active funds to be outperformed by their benchmarks over the three- and five-year periods. Some of the key findings from the report including Read more [...]

The VIX is at a crossroads – mind the gap.

As you, dear patient reader, have no doubt noticed, volatility is back. The VIX® has reached levels not seen since the peak of the Eurozone crisis over two years ago. The exact reasons might be debatable, but either way October is living up to its perennial reputation as the cruelest month for equities. Source: CBOE Each time in recent history that the VIX closed above 20, it has rapidly collapsed (see above). And duly following the principle of induction, spikes in volatility are now interpreted Read more [...]

The Best Offense

Some American football coaches are fond of citing the maxim that the best offense is a good defense -- because even if your offense is having an unproductive day, a good defense means that you're always in the game. A related principle applies to investing -- in some environments, the best way to win is not to lose. The first half of October has been such an environment, as defensive indices, laggards in 2013 and for the first three quarters of 2014, have finally come into their own. The chart Read more [...]

What Ails the Market?

Everyone wants an explanation. Cataloged below are popular explanations with each rated as plausible, contributing, possible, or unlikely. Falling oil prices – bad news for energy stocks but good news for the rest of the economy, especially for consumers.  A few years back everyone was wishing for cheaper gasoline and now that it is almost here we blame it for falling stock market. Contributing Slow growth in Europe and recession risks in Germany – Europe’s economy is barely growing Read more [...]

Real Yield and a 14% Return … O Canada

The S&P Canada Sovereign Inflation-Linked Bond Index has returned 1.8% month-to-date and an outstanding 14.87% year-to-date.  Investors of inflation-linked bonds are interested in the real yield which measures a bond’s yield adjusted for inflation.  Canadian inflation (2.1%) has recovered in recent months from the low end of the Bank of Canada’s 1% to 3% target range. Inflation-linked bonds are not just a hold-to-maturity strategy. Inflation expectations vary with economic conditions Read more [...]