Three recent research papers continue to grow our understanding of how behavioural traits impact on markets. The first provides insights into Warren Buffett's success; the other two examine the markets' response to earnings information.
Plenty of anecdotes suggest that baby boomers are spending their savings and will leave nothing for the next generation. Looking at the actual data, this is questionable.
While some still firmly believe that values and ethics have no part to play in investing, the tide is turning. Values play a vital role in investment and business decisions - and, increasingly, investors care about more than just financial returns.
Human beings are subject to behavioural biases, which negatively affect their ability to make rational choices. These behavioural biases create market inefficiencies that active investment managers can exploit to generate alpha.
Two recent books indicate that a quiet revolution is challenging the foundations of economics, promising radical changes in how we view many aspects of organisations, public policy, and even social life.
The winner of this year's Nobel Memorial Prize in Economic Sciences, Richard Thaler of the University of Chicago, is a controversial choice. For some in the profession, the idea that psychological research should even be part of economics has generated hostility for years.
Portfolio insurance - invented over 40 years ago - has experienced the renaissance that it very much deserves. Trend (momentum) investing dates back over 40 years, too - the success of which is traced back in this paper to over 100 years.
Two recent studies provide evidence that issues unrelated to the fundamental operation of a firm impact their market valuation.
While some still firmly believe that ethics has nothing to do with investment, the tide is turning. Increasingly, clients are demanding ethical portfolios.
Managers must both develop and implement an investment process - but we seem to be determined to deny them recognition for the former and to judge their performance on the latter.
People often consider risks in isolation, and overpay for protection as a result. Rather than hedging against specific risks, investors should think like a game theorist.
Game theory, econometrics and distributed computing power can reveal a client's true preferences for risk, loss, uncertainty, time and goals – with scientific precision and in terms that clients can understand.
Two recent studies shed light on retirement income planning. One proposes a framework to avoid the pitfalls of shortfall probabilities. The other finds biological age impacts spending rates.
Observing how a client makes financial trade-offs can provide a more accurate measure of their risk preferences than if we ask questions about what they think they would do.
It's become conventional wisdom that under-performance is due to the irrational investment behavior of individuals. It's time to question whether conventional wisdom has even a scintilla of meaning.
The classic view of cash when investing is that it's something to minimise. But a recent study found that we're just not content without a healthy allocation to cash. In fact, pushing investors to put all their cash to work increases their financial stress.
Masterclass NZ is a post-graduate extension program focused on contemporary issues that are fundamental to building better quality portfolios. The one-day program is comprised of five research-based, active learning sessions:
Clients benefit from understanding the investment journey. Having prepared responses to scenarios improves the chance of success.
Can clients easily change their behaviour? The theory of planned behaviour can help to promote real change and convert intentions into outcomes.
It is time to properly account for risk characteristics of client’s most valuable asset - their human capital. This isn’t easy to implement and places practitioners in a difficult situation...
Research suggests we mentally account for income and assets with an intrinsic hierarchy of priorities - a "hierarchy of retirement needs". So retirement income strategies should be reframed to answer three questions.
Finology Summit 2017 featured a stellar lineup of finology experts offering their best high conviction idea/thesis on how the winds of change are impacting how investors think and behave with respect to money, and how we can better relate with them (and help others who must do so).
Finology Summit 2017 focused on how "The winds of change" are affecting how investors think and behave with respect to money, and how we can better to relate with them. Here are our key takeouts.
The key to influencing investors is to have the right mindset, build the right skillset and apply the right toolset.
A formal, written spending policy can help investors focus on what's really important - will they meet their goals?
This workshop will help you develop a clear, communicable, logical and understandable investment philosophy, deciding what's important and what's not.
Clients benefit from understanding the investment journey. Having prepared responses to scenarios improves the chance of success.
Our panel discusses the steady stream of disruption around the delivery of financial advice.
Can clients easily change their behaviour? The theory of planned behaviour can help to promote real change and convert intentions into outcomes.
The key trait for relating to investors in the future will be the one skill that our brains are not programmed to receive from a computer - empathy.
Strong winds of change are blowing - we appear to be entering a new age of populist and economic nationalism. What does it all mean for the outlook for the markets?
Regulatory tailwinds, fee pressure, unbridled experimentation around the delivery of advice - it's a steady stream of disruption. Ironically, technology is both our poison and antidote.
In 2002, we embarked on a quest to identify the secular forces which would substantially influence markets over the coming decade. We proposed five megatrends - which still drive portfolio construction today.
With the onward marching of computing power, our transition from being "knowledge workers" to "relationship workers" may be here sooner than we realise.
We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In the end, it all comes down to people and values.
Four common behavioural problems make the journey of investing particularly challenging for many investors. An understanding of each help investors stay the course and meet their goals.