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Performance Calculations

Investment performance seems like it should be easy to measure and even easier to understand, but investors often find that interpreting performance measurements can be confusing. One reason for the confusion is that the financial industry standards for performance reporting are designed to accurately measure the “performance” of an investment manager and not necessarily the personal performance of an individual. In this article we’ll clarify these differences to help you better understand your own performance report and why your Structured Investing portfolio uses a particular method. PDF

How Does Asset Class Investing Differ from Indexing?

Rex Sinquefield and David Booth started the first S&P 500 index funds in 1973 — Booth at Wells Fargo and Sinquefield at American National Bank. In 1981, determined to improve upon some of the problems they’d encountered with indexing, the two men formed Dimensional Fund Advisors (Dimensional). With the help of their former professor at the University of Chicago, Gene Fama Sr., Sinquefield and Booth developed what is known today as asset class investing. PDF

Why We Overweight Small Cap and Value Securities

Both small and value securities have several distinct factors for which investors demand a higher risk premium. For example, smaller companies are riskier than large companies, and distressed companies (value) are riskier than non-distressed (growth) companies. Over long periods of time, the risk premiums of small and value have generally proven to compensate investors for taking these additional risks. PDF

Why Invest in International Stocks?

Investors often tend to invest in what they know. Perhaps they keep a large portion of their 401k assets in their own company’s stock, or maybe they buy other companies’ stock within the same industry because they feel they know their business better. Similarly investors often concentrate their portfolio in their domestic market, a behavioral finance issue known as home bias. PDF

Why Stay Conservative In Fixed Income?

When investing in fixed income two main concerns drive the risk return tradeoff: maturity and credit. As the maturity of a bond increases, its interest rate risk increases and so should its return. When the credit quality of a bond declines, its default risk increases and so should its expected return. In practice however, the relationship between risk and return for fixed income investments has not been linear. PDF