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August
10, 2010 - Vol 4, Issue 32
Dear Reader,
Financial planners have eagerly awaited any research
that could finally, definitively prove - or disprove - the pesky
notion that active management is effective. Though no one has
yet risen to that challenge, past academic studies have been
improperly interpreted to show that portfolio policy, or asset
allocation affects portfolio returns far more than active
management. As Ken Solow and Michael Kitces write
in this guest contribution, the most recent study to tackle the
active management debate, by Yale professor Roger Ibbotson, shares
two weaknesses with previous research.
Among
the most important things that good advisors bring is the ability to
help clients make the right trade-off between risk and return
... and, as Dan Richards says, to help clients understand the
critical relationship between the timeframe over which they hold
investments and the volatility they experience.
In this interview, retirement expert Zvi Bodie discusses the
role of stocks and annuities in a retirement portfolio, and how
advisors and clients should think about risk. A transcript and
a video of the interview are provided.
Public pensions are severely underfunded, at least according
to the economists. Actuaries disagree, and at stake is
nearly $2 trillion. We look at why these groups arrive at such
different valuations, and which one is likely to be correct.
More articles below...
All financial advisors who provide investment advice directly to
clients or exercise investment discretion over client assets should
be subject to fiduciary standards. In this guest
contribution, Scott MacKillop takes exception to the article by
John Lohr entitled "Fiduciary": Much Ado about Nothing!
that appeared here last week.
When you have a certain degree of skill at a given task, people
often assume that you will naturally be able to manage other
people who do that same task. That's how Justin Locke
because a first-time manager in the orchestral business, and he
shares a few important lessons to apply when you receive that
important promotion that elevates you above your coworkers.
After Marxism, no economic theory today may be as derided and
despised as the hypothesis of market efficiency. The
idea is often misunderstood, sometimes willfully. So what does
"market efficiency" mean? In the latest installment of
his series for the educated layman, Adam Jared Apt provides some
answers.
Advisors serving 401(k) plans may successfully improve
investment performance, only to find out that the plan sponsor
is totally unsatisfied. In this guest contribution, Jeffrey
Briskin relates a recent conversation that made that painfully
obvious, and a recent study by his company confirmed that such
outcomes occur all too often.
In the final installment of her series on low-budget marketing,
Kristen Luke discusses how to put all the elements together in
a written plan.
Lastly, we highlight submissions to Market Commentaries.
We welcome guest submissions from our readers. For more
information, here are our guidelines.
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When Active Management Matters