Investor Education / Blog

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Bull Case and Bear Case for Investing in Treasury Bonds Right Now

Today, I wanted to provide two opposing views of the merits of investing in U.S. Treasuries in today’s environment.

Whenever I make investment decisions for clients, I always try to consider arguments both in favor and against the investment. It’s important to understand both sides of any issue and do our best to remove our own personal biases and emotions from the decision. In this particular case, with regards to U.S. Treasuries, both sides of the argument contain valid points causing stark disagreement among even the most respected managers and pundits. Continue reading “Bull Case and Bear Case for Investing in Treasury Bonds Right Now”

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Bear Market Rallies in Context

The stock market is experiencing quite a rally this month. So, I thought it would be interesting to take a look at the last five bear markets to check (a) if rallies have been common within past bear markets, (b) how long bear market rallies typically last, and (c) the average magnitude of bear market rallies.

Executive Summary: Every single one of the last five bear markets going back to 1973 included at least one rally of 10% or more before the market fell further. The average bear market rally since 1973 has been about 15% and lasted about 1.5 months on average. The rally we’re currently experiencing has produced about a 12.1% increase over the last three weeks.
Continue reading “Bear Market Rallies in Context”

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Bigger Price Swings in Both Directions

You may have noticed larger price swings in the market over the last couple months. Another term for this is “volatility.”

Increasing volatility is normal as markets transition from up-trends (bull markets) to down-trends (bear markets). And, actually, large price swings IN BOTH DIRECTIONS are characteristic of bear markets.

Now, it’s reasonable to expect to see most of the worst daily returns in history during bear markets. However, what I found far more interesting when doing my analysis is that most of the best daily returns also occur during bear markets. In fact, eight out of the ten best days in the market (1950 – 2018) occurred during bear markets! Continue reading “Bigger Price Swings in Both Directions”

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Don’t Let The Tax Tail Wag The Investment Dog

There are a few folks I’ve been speaking with over the last couple months that are interested in working with me but are hesitant to move forward because they don’t want to sell any investments. This is largely due to the large capital gains they have embedded in some of their long-held investment positions.

Before I discuss the potential problem with this line of thinking let me express that (1) I am very sensitive to taxes when managing portfolios and (2) I do manage around concentrated positions with large capital gains when appropriate using a variety of methods (e.g. options strategies).

The problem with this line of thinking is that you’re letting the tax tail wag the investment dog. The best way to illustrate what I’m talking about is with a simple example. Continue reading “Don’t Let The Tax Tail Wag The Investment Dog”