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"...a long habit of not thinking a thing wrong, gives it a superficial appearance of being right, and raises at first a formidable outcry in defence of custom."
Thomas Paine in Common Sense
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PCM NEWSLETTERS
How to Get Wall Street's Hands Off Your Wallet
A short book authored by Scott D. Reinhardt, CFA. Click the above link to request your free copy.
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Why "Passive?"
The activity that generates investment returns takes place in fields and factories, in corporate headquarters and R&D laboratories. The activity that generates investment returns takes place in the boundless imaginations of entrepreneurs, and in the work ethic that has built the modern world over hundreds of years of human enterprise. Activity in brokerage houses and investment firms, on the other hand, generally has one purpose – to generate revenues for those firms…The term "passive" essentially means avoiding the subtraction of value through adverse manager activity.
January 2012, by Tom Geddes
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All That Glitters Is Not...Milk?
The larger lesson is that while gold may have attracted hype, attention, and billions of dollars in 2011, poor market-timing meant that the average gold investor may have ended up underperforming even the flat S&P, in some cases very substantially. We believe it is a far better strategy to stick to less shiny but more historically productive asset classes like stocks, bonds, and real estate, including stocks of companies that mine, process, refine, market, sell and deliver these commodities, in the context of a broadly diversified, low-cost portfolio of index funds and asset class funds.
January 2012, by Tom Geddes
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When the Bear Bites
As I write, major equity asset classes are entering official "bear market" territory of 20% off recent highs. This is not to say that this decline will inevitably persist, nor that investors should change course based on the fact that equity markets seem to be approaching this rather arbitrary threshold. We know that bear markets will come along, we simply don't know when and for how long. Our strategy should reflect this fact.
October 2011, by Tom Geddes
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Ten Questions to Ask the Person Managing Your Money
How do you know if you are paying too much in investment management fees? How do you know if your portfolio is tax-efficient and appropriately diversified? How do you know how well your portfolio is performing? You ask the right questions. Here are ten simple questions to ask the person providing you with investment management services. The answers will help you determine whether you are positioned to have an excellent investment experience over the long term.
September 2011, by Passive Capital Management
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The Bumpy Ride in Equity Investing
Volatility in the equity markets is, historically speaking, absolutely normal. In fact, volatility is a key component of the risk for which investors should expect to be rewarded over the long term. To put this in perspective, history tells us that across the whole stock market, investors should expect negative returns in one out of every four years.
August 2011, by Thomas A. Geddes
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Strategic Asset Allocation vs. Tactical Asset Allocation
A key differentiator in the Passive Capital Management, LLC approach is our focus on strategic asset allocation. We work with each client to develop an appropriate asset allocation for his or her goals, investment time horizon and tolerance for risk and volatility. Proponents of tactical asset allocation use words like "nimble" and "agile" to suggest that they can jump in and out of positions in reaction to (or in anticipation of) market movements.
July 2011, by Thomas A. Geddes
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What Are The Disadvantages of Passive Investing?
Is passive investing boring? I don’t think so. Seeking out the most sophisticated and lowest-cost asset class funds and implementing an elegantly simple strategy is exciting for me. Helping clients have a successful investing experience is highly rewarding, especially when those clients are reeling from past experiences of bad advice, bad stock or fund picks, or market-timing failures.
Is there a downside? Certainly. You’ll need to find something else to talk about at the golf club.
July 2011, by Thomas A. Geddes
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2010 - Are You Earning Market Results?
Believe it or not, most investors do not earn market returns due to excessive fees, poor diversification, trying to time the market, excessive taxes or a combination of all of these. A recent study by Dalbar, Inc., a Boston-based research firm, showed that for the 20 year period between 1989 and 2008 the S&P 500 had an annualized return of 8.42% while the average investor earned only 1.87%. That’s a lot of money left on the table.
January 2011, by Mimi H. Boblitz & Scott D. Reinhardt, CFA
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All Bonds Are Not Created Equal - Characteristics to Consider
The investment advisor representatives at Passive Capital Management, LLC do not like to make things unnecessarily complex. When evaluating various fixed income alternatives, we believe that high-quality, short-duration, liquid bonds are the best tools to use for a variety of reasons. We believe that bonds should be used to preserve capital and dampen the overall volatility of a portfolio, not to assume additional credit risk in an effort to "chase yield."
August 2010, by Scott D. Reinhardt, CFA
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2009 - Are You Earning Market Results?
Believe it or not, most investors do not earn market returns due to
excessive fees, poor diversification, trying to time the market, excessive taxes or a combination of
all of these. A recent study by Dalbar, Inc., a Boston-based research firm, showed that for the 20 year
period between 1989 and 2008 the S&P 500 had an annualized return of 8.42% while the average investor earned only 1.87%. That’s a lot of money left on the table.
February 2010, by Mimi H. Boblitz & Scott D. Reinhardt, CFA
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The Way Forward: Independent Advice and Trust
Given what has recently occurred throughout our financial system and economy, there will undoubtedly be significant changes to many aspects of the financial services industry, including regulation, compensation, disclosure and risk assessment. What won’t change is human nature. This wasn’t the first “bursting of a bubble” and it certainly won’t be the last. Nonetheless, it is my opinion that the most recent financial turmoil will accelerate a trend toward a more skeptical and more educated investing public.
October 2009, by Scott D. Reinhardt, CFA
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The Comfort of Cash
Many investors have felt the temptation to exit the stock market over the past 12 months and hold cash or cash equivalents. Switching to cash may appear to be a safe strategy but, in reality, you are actually trading one risk for other risks. I believe that risk is best managed by a prudent asset allocation, not by trying to time short-term market movements.
April 2009, by Mimi H. Boblitz
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Is It Different This Time? A Brief Historical Review of Market Returns
While every bull and bear market has some unique characteristics, market cycles are an inherent aspect of investing and cycles must be endured if investors want to harness the returns that global capitalism provides over time. We will come upon additional bear markets in the future and we must plan accordingly by controlling those things that can be controlled, such as costs, tax efficiency, asset allocation, diversification (including high-quality bonds) and discipline.
January 2009, by Scott D. Reinhardt, CFA
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The Case Against Active Management
Many investors spend a lot of time and money trying to predict the future movements of stocks and mutual funds or they hire people to make predictions on their behalf. Not only is this a costly strategy, it does not increase the odds of enjoying a positive investment experience.
October 2008, by Mimi H. Boblitz
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Making the Case for Diversified Real Estate - Risk, Return & Correlations
Diversified real estate funds have historically been effective tools to help lower the overall risk of an equity portfolio. Over the past 30 years the DJ Wilshire REIT Index has had a similar risk/return profile as that of the S&P 500 Index with relatively low correlations to other asset classes.
July 2008, by Scott D. Reinhardt, CFA
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The Passive vs Active Debate
Investing is about understanding your long-term goals, structuring a portfolio to help you achieve those goals, and adhering to a prudent investment strategy. Additionally, you do not need to assume manager-selection risk in order to enjoy a successful investment experience.
April 2008, by Scott D. Reinhardt, CFA
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The Re-Balancing Act of Investing
Rebalancing is done not necessarily to improve returns but to manage portfolio volatility and maintain a consistent level of risk throughout all phases of the market cycle. A disciplined rebalancing process will prevent emotions (fear and greed) from altering your previously established asset allocation.
April 2008, by Mimi H. Boblitz
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Risk Matters
While many investors spend their time evaluating historical and prospective returns, we believe it is even more important to analyze and understand risk. We believe that the capital markets will reward investors over time if they take certain types of risk.
January 2008, by Scott D. Reinhardt, CFA
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Making the Case for Fixed Income - Portfolio Volatility and
While some investors are inherently opposed to having any exposure to the fixed income asset class, we believe a strong case can be made that it belongs in all portfolios.
October 2007, by Scott D. Reinhardt, CFA
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Illiquid Investments: Returns, Risks & Opportunity Costs
The lag in marking-to-market the value of illiquid investments can overstate underlying values and understate the risk profile of the investment.
October 2007, by Scott D. Reinhardt, CFA
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How Investors Relentlessly Underperform the Benchmarks
The primary sources of portfolio erosion include: excessive costs, market timing, tax inefficiency, and inflation.
July 2007, by Scott D. Reinhardt, CFA
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The Benefits of Consolidating Assets with One Trusted Advisor
There are important benefits to having your financial assets consolidated with one advisor, especially if that advisor does not accept commissions for simply generating activity in your account.
April 2007, by Scott D. Reinhardt, CFA
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Manager Selection Risk & Fortune-Telling
It remains very difficult to separate the skillful manager from the lucky manager and manager selection is a risk for which you may not be compensated.
April 2007, by Scott D. Reinhardt, CFA
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The Absolute Return Myth
Many investors are paying phenomenally high fees and taxes for what is really beta, or market, exposure. Alpha remains elusive in the zero-sum (before fees and taxes) game of investing. It also remains very difficult to separate the skillful investor from the lucky investor.
April 2007, by Scott D. Reinhardt, CFA
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