More by the Same Author
2013-01-31 Making Sense of Low Volatility Investing by Feifei Li of Research Affiliates
Why do low volatility stocks outperform riskier ones over time? Dr. Feifei Li, our Head of Research and my long-time collaborator, has focused on understanding the theoretical foundation underpinning the low volatility anomaly and documenting the strategy's risk-return characteristics in developed and emerging markets. In this issue of Simply Stated, our newsletter focusing on investor education, she summarizes the literature on the low volatility effect as well as provides additional insights from her own research based on an expanded global data set.
2012-10-22 Eggs Are Not Enough: The Truth About Diversification by Feifei Li of Research Affiliates
We learn in finance theory that diversification simply means not putting all your eggs in one basket. Simple as the idea is, most investors do not hold portfolios that are even close to being truly diversified. Two reasons make this sensible objective difficult to achieve. First, most investors are not disciplined enough to implement diversification. To illustrate my point, pause and check whether you are willing to reduce equities when the trailing 12-month return on stocks is 20+ percentage points higher than bonds?