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To say that “money isn’t everything” is more than a cliché. Studies in the early 1970s demonstrated that a sense of well-being, or happiness, had not increased commensurately with income over the previous half century.1
That trend continues as the modern world has arguably made well being more elusive than ever. Fortunately, positive psychology arose in the 1990s, attempting to find the key to understanding what makes people flourish. It has spawned the so-called happiness literature that seeks modern truth by weaving together science and ancient wisdom. How to be happier is now the most popular course at Harvard and Yale.2
Business people and entrepreneurs are also contemplating some of these age-old questions. Mo Gawdat, a serial entrepreneur and Chief Business Officer at Google X, tried to engineer a path to joy in his book, Solve for Happy, by expressing happiness as an equation.
HAPPINESS ≥ Your Perception of the EVENTS of your life − Your EXPECTATIONS of how life should behave
According to Gawdat’s model, if you perceive events as equal to or greater than your expectations, then you’re happy—or at least > SEE MORE
Founder and Private Wealth Advisor
Beacon Hill Private Wealth
As the director of research for the BAM Alliance, I was recently asked to comment on columnist Mark Hulbert’s article “International stocks provide the least protection just when investors need it most.”
Hulbert noted: “U.S. stocks’ performance so far this year offers a perfect illustration of why investors should not exaggerate the benefits of international diversification. When the U.S. stock market plunged more than 10% in late January and early February, for example, international stocks lost even more. Far from cushioning the fall for investors, they made things slightly worse. When the U.S. stock market again fell sharply, between Mar. 9 and Apr. 2, international stocks also fell. Though this time they didn’t fall as much as U.S. equities, the cushion they did provide was scant comfort.”
He concluded: “In both cases, international diversification did not live up to its advance billing as providing a ‘free lunch’ of reducing portfolio volatility while forfeiting very little return in the process.”
To be fair, he did add: “These two instances by themselves add up to little more than anecdotal evidence. But it turns out that, > SEE MORE
At the end of each year, I write a blog and give a speech on the lessons the markets provided on prudent investment strategy. In most years, markets provide remedial courses, covering lessons taught in previous years—which is why one of my favorite statements is that there’s nothing new in investing, only the investment history you don’t know.
The market “correction” (defined as a drop of at least 10 percent from the previous high) of August provided investors with an opportunity to learn some lessons. In my discussions with investors and advisors alike, I found the usual wide spectrum of lessons learned.
Look through the list and see which, if any, of the lessons listed below describes what you > SEE MORE
A commodity trading advisor (CTA), also known as a managed futures fund, is a hedge fund that uses commodity futures contracts. They use a variety of trading strategies, including systematic trading and trend following—the vast majority of CTAs use strategies based on trends (time-series momentum)—which take long positions on securities that are trending upward and/or short positions on securities that are trending downward. CTAs tout the benefits of diversification and the generation of alpha. Assets under management in this strategy have risen to more than $340 billion.
The intuition behind the existence of price trends is behavioral biases exhibited by investors, such as anchoring and herding, the disposition effect and confirmation bias, as well as the trading activity of nonprofit-seeking participants, such as central banks and corporate hedging programs. For instance, when central banks intervene to reduce currency and interest-rate volatility, they slow down the rate at which information is incorporated into > SEE MORE
Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves.
On Oct. 10, 2018, the S&P 500 Index fell 3.3%. The 11thwasn’t much better, with the index dropping a further 2.1%, producing a two-day loss of 5.4%. These drops occurred without any bad economic news. In fact, Federal Reserve Chairman Jerome Powell indicated it was the Fed’s view that the economic recovery was robust. And most economists are forecasting continued strong growth into next year.
Looking for an explanation, most market commentators blamed the drop on the expectation that the Fed will continue to raise interest rates. However, the market was already expecting several more rate hikes over the next year. Further, on the 11th, the news on inflation was benign, with the August Consumer Price Index increase at just 0.2%, producing a 12-month rate of just 2.3%. Other explanations were tied to trade-war concerns. However, all of these facts were well-known prior to the 10th, and nothing had really changed.