Chasing the Best Performing Countries

Chasing Single Country ReturnsA broad index fund is one way to get international exposure in your portfolio, but index funds aren’t perfect. One alternative is to pick single country funds but how do you choose which countries to own?

The problem with picking any fund is our reliance on recent performance. This is a common mistake investors make – chasing returns. Without a plan, the best performing funds are the first ones picked every time.

The investing world we live in tempts us with one, three, and five-year returns on every stock and bond fund around. We love to own what’s going up, we hate to miss out, so we chase returns of the best performing funds of the recent past. Sometimes it works, but not always. Continue Reading…

Happy Hour: Net Neutrality and Duracell

Welcome to the end of the week! Just sit back, relax, and enjoy this weeks roundup in another edition of Happy Hour.

Net Neutrality

Obama came forward this week recommending net neutrality be enforced by making internet providers utilities. The Republican response was an emphatic disagreement per usual. Really, it was Ted Cruz making a fool of himself.

We’ve also devolved to a point where reverse psychology might work in D.C. Continue Reading…

2014 Dividend and Capital Gains Tax Rates

Dividend and Capital Gains TaxMuch of the discussion around investing involves managing costs. Taxes need to be part of that talk. Like fees and expenses, dividend and capital gains tax eats away at your returns.

Any time your investments make money, taxes aren’t far behind. To make it easy on us, Congress whipped up a simple complex tax code for income, dividend, and capital gains tax rates. Lucky for us, that tax code can change on a whim, making it worth staying updated on.

Before we go any further, dividend and capital gains tax are for money invested through taxable accounts only. Taxes on investments are a moot point when dealing with retirement and other tax advantaged accounts. You can buy and sell all day without worrying about the tax consequences, though I don’t recommend it. Continue Reading…

Happy Hour: Midterm Shuffle

Welcome to the end of the week! Just sit back, relax, and enjoy this weeks roundup in another edition of Happy Hour.

Midterm Shuffle

The midterm elections are finally over. No more political ads or candidate bashing. The People have spoken. And just in time too. Those can’t miss holiday attack ads are coming soon.

Big data site FiveThirtyEight got its political projections right..again. But, are you really surprised by the results? Continue Reading…

Equal Weighting International Funds By Stocks vs Countries

Equal weighted fund strategies are the laziest form of active indexing. When you put the least amount of thought into changing an index, the lazy solution is to give every stock an equal say. However, the results show equal weighted funds outperform your vanilla cap weighted funds.

That outperformance is accidental.

Luck would have it that by equal weighting every stock, you accidentally tilt toward factor premiums, like value, momentum, volatility, or size, which can add to long-term performance. I cover this in the smart beta guide. If you weighted stocks alphabetically you’d see similar results. Then the fund industry could charge a premium for ALPHA-bet funds instead.

With international funds, an equal weighting adds risk. I suspect this is one reason the equal weighted MSCI EAFE fund didn’t last long. The side effect of equal weighting international, emerging market, or global funds, is increased country risk. Continue Reading…