Widespread investment wisdom dictates that there are two “irrational” tendencies of human behavior that harm investment performance when acted on excessively: greed and fear. In a simple sense, “greedy” investors want maximum participation in rising markets and “fearful” investors want minimum participation in falling markets. Upside and downside capture statistics correspond a ...

The Dow finally hit 20,000.  I wouldn’t ordinarily put much importance on an arbitrary milestone (see The Dow 20,000...Should We Care?), but the long hover just below this level was extraordinary.  This is not to say that markets need behave in any predictable manner.  Daily movements of the market tend to behave like random walks, and random walks commonly exhibit long streaks ...

“Dow 20,000” Those two words encapsulate three concepts: 1) the Dow is a relevant economic indicator; 2) 20,000 is a noteworthy milestone; 3) special consideration should be given to investing at all-time highs.  I’ll examine each in turn. The Dow is an imperfect representation of the market. The Dow index is a price average of 30 stocks chosen by committee.  It has long bee ...

New Frontier Advisors creates and maintains diversified investment solutions for long-term wealth accumulation and preservation. Clients and advisors often raise concerns about individual assets or asset classes held in these portfolios – concerns that are based on looking at the performance, or attempting to assess the potential dangers, of those components in isolation. But ...

Factor models are hugely important to the finance industry. These risk models provide tremendously useful information to investors and managers by estimating the risk of any portfolio of stocks, and the models have also been extended to other asset classes such as bonds and commodities. The consensus of most current econometric thinking is that a sizable part of price movemen ...

There has been much discussion and speculation of the political and economic consequences of yesterday’s vote for the UK to leave the European Union.  Ignoring politics altogether, and anything speculative about economics or financial markets, what can be said based on probability, financial theory, and an understanding of economic equilibrium? First, let’s put the surprise of ...

Given great interest in the DOL decision on fiduciary responsibility, we note a blog posted in 2012 by James Watkins that referenced New Frontier’s patented optimization process followed by a comment by noted expert Steve Winks that we quote below: “…[T]here is massive push back from the brokerage industry, which neither acknowledges nor supports the fiduciary standing of brok ...

Mutual funds are often touted as the most effective and convenient tools for individual investors and managers to build diversified portfolios. However, investor experience is often subject to the whim of the mutual fund manager when it comes to the size and timing of dividends, and, especially, capital gains distributions. If they occur within a taxable account, unpredictable ...

Many large financial intermediaries and high net worth investors invest in Private Equity funds.  The consulting firm Cambridge Associates reports that the 25-year return on private equity of 13.5% can be compared to the Russell 2000 9.75% return over the same period.  Similarly, in the survey article by Kaplan and Sensoy, they find that private equity outperformed capital mark ...

At New Frontier, we believe in strategic investing. We believe that markets are mostly unpredictable and that making directional bets on market performance or individual securities is largely a fool’s errand. Over most time periods some securities increase in value, whereas others decrease, almost all unpredictably.  With that understanding, the best investment strategy is to s ...