Not all hedge funds are obligated to disclose their holdings, trades, or performance. About half of them are, however, and their performance can be found online through Morningstar and other sources. This information may not be as detailed as you would like, and you may try other means. Since the Dodd-Frank Act in 2010, more information about hedge funds is available to the public. This does not mean that all the information you seek will be readily available, however, and there are many hedge funds that do not make their information public. Continue reading...
Analytical financial theories and trading strategies can be “backtested” by applying them to historical data. Backtesting is to simulate what it would have been like to use a certain strategy or indicator in the past. Because markets are more complicated than a simple algorithm, such as an assumed future rate of return, it is preferable and somewhat more dramatic to use actual historical data for testing. There is an abundance of historical market data available to those who would like to use it for backtesting a theory, strategy, or indicator. Continue reading...
It requires a great deal of due diligence, but investors should understand that past performance is not indicative of future performance. Focus on experience. In the stock market, as with most things in life, hindsight is 20/20. There are countless lists on the internet with titles like “The Best Mutual Fund Families” and “50 Winning Mutual Funds.” It is important to understand that the names on those lists are a function of hindsight and not foresight. Continue reading...
Run rate is a term that can be applied to a certain type of accounting and management estimation or to the depletion of equity options. The first kind is when a current metric (such as sales revenue for a quarter) is assumed to extend out to the end of the year or accounting period for estimation or valuation purposes. The second kind uses the average dilution from the past three years, generally, to show the effect that convertible securities are having on the share price of a company. Continue reading...
Leading indicators are economic or price data which have some degree of correlation with a movement in the market or a stock price. Leading indicators tend to happen before the market or price movement occurs. Traders and economists use leading indicators frequently to prepare for what’s next; they are based on theory as well as empirical historical evidence but like all indicators, they do not have a 100% accuracy rate – past performance does not guarantee future results. Continue reading...
Account history is a term especially useful for investment accounts, where transactions beyond a current month or year’s records are useful for reference. Most people are familiar with the transaction history that is available for the current month, quarter, or year on an individual’s savings, checking, and credit card accounts. These are often called “activity ledgers” or something similar. Account history that reaches further back might be more useful for investment accounts, where the current value of investments, and their cost basis, will depend heavily on account history from potentially years in the past. This sort of query can be made easily with online investment account viewing software from a broker or custodian company. Continue reading...
Based purely on statistics, the “best” performing stock ever between 1957 and 2007 was Phillip Morris (cigarette maker). If you had invested $1,000 into the company in 1957, your investment would be worth a little under $6 million today. Of course, during those 50 years, you would have had to survive the sudden dips and jumps involved without making any rash decisions, something very few investors have the stomach for. Continue reading...
Realistically, you should not plan on getting more than about 10% average per year over the long term for a portfolio of diversified equity exposure and you should really plan on getting less than that to be on the safe side. Everybody wants to have a portfolio that outperforms the market when the markets are rising and does not lose money when the markets are falling. We have a secret for you – it’s not possible. Continue reading...
Benchmark indices are used to gauge the performance of an investment portfolio. In order to evaluate the performance of your portfolio for any given period of time, find the corresponding index for each investment in your portfolio. For example, for US Equities, use the S&P 500 For your Small Cap portion, use the Russell 2000 Index, etc. You can also compute weighted index blends that correspond to your index allocation (e.g., 40% MSCI / 60% S&P). If your manager or the portion of your portfolio significantly (by more than a couple percent) underperforms the corresponding index, be sure to carefully monitor this manager or portion of your portfolio. Continue reading...
You don’t want to overdo it, but it’s important to stay on top of things. Generally speaking, if your portfolio is run by professional investment managers, you should check the performance quarterly; otherwise, you may not give them enough room to do their jobs. If you run your own portfolio, it is entirely up to you how often you check the performance, but be aware that the closer and more short-term your focus gets, the higher the chance you have of losing sight of the bigger picture. Continue reading...
A good investment performance calculator will give you the ability to input various cash flow scenarios and compute weighted returns, among other options. A really useful investment performance calculator will allow you to input various cash flow scenarios and to see weighted returns based on these. Dollar-and-time-weighted performance, dividend cash flows, deposits and withdrawals, as well as fees paid for various transactions, will all be incorporated in a good calculator. Continue reading...
Many studies have investigated the benefits of purchasing IPOs, and the results might surprise you. Despite the fact that new issues tend to be priced at a discount from the price that underwriters have decided is a fair valuation, their performance after the initial frenzy tends to be lackluster. While most investors think that IPOs are good investments, this is not exactly true. There are IPOs that have doubled or tripled in price during the first day, and there are IPOs that opened trading below the original IPO price (and anything in between). For short term trading, it can go either way, but if the IPO is a “hot issue,” meaning that there are more indications of interest than there are shares to fill the orders, the average investor will not be able to procure IPO shares anyway. Continue reading...
Since the Dow Jones Industrial Average’s creation in 1896, there have been several crashes and several days of huge gains. The biggest moves can be defined in two ways: either by percentage change or by change in points. In terms of gains, the largest single-day point gain occurred on October 13, 2008, when the Dow rose 936 points (11%) – the sudden leap occurred during a time of wild upside and downside volatility, and was in response to unexpected positive global economic news. Continue reading...
Surprisingly, target funds seem to be doing their jobs well enough, despite their ‘one-size-fits-all’ style. There are many target date mutual funds that have appeared in the past 5-10 years, which are supposed to simplify your investment decisions. These target funds are nothing more than carefully selected asset allocations, based on historical models and a client’s time horizon. For example, Target Retirement 2018 will probably consist of 70% Fixed Income Funds, and 30% of Equity Funds, and Target Retirement 2028 will probably consist of 50% Fixed Income Funds and 50% Equity Funds, etc. Continue reading...
The best day for the markets, in terms of the largest single-day point gain for the Dow Jones Industrial Average, was October 13th, 2008. It happened when the Dow closed up 936 points in response to seemingly positive news about the handling of the ongoing financial crisis. The market would fall much further however before the next uptrend began, on March 9, 2009. In percentage terms, the biggest gain for the Dow came on March 15, 1933, when the index shot up over 15% (8.26 points) in response to Franklin D. Roosevelt's (FDR) Emergency Banking Act. Continue reading...
Billing Statements are primarily used by credit card companies, listing the transaction history and balance due on a customer account. A billing statement is mailed, physically or electronically, to a customer at the end of a billing cycle, which is usually monthly. The statement will show the balance due and the transaction history, perhaps including recent payments received from the customer. The term “billing statement” is sort of a blend between two distinct documents: a bill and a statement. Continue reading...
The assumed rate of return on an investment is an important consideration, especially since assuming a rate of return that is too high might cause the individual to under-invest. You should understand the difference between an assumed rate of return that is optimal and one that is going to give you the highest probability of reaching your goals. In a perfect world, your portfolio would average 15-20% per year, forever, but this is really not feasible. Continue reading...
All of the investments held by an individual or mutual fund or other entity are referred to as that person or entity's portfolio. These investments can range from securities to cash to real assets held for the purpose of preservation, growth, or income; essentially anything that is part of a long-term financial strategy that is held separate from daily operations and cash flow can be considered part of a portfolio. The gains and losses of all the singular investments held are totaled up to find the overall return of the portfolio. Continue reading...
If your portfolio isn’t growing enough for your liking, you might need to take on more risk or change your active management company. The answer is surprisingly simple: find good managers, fill your portfolio with more risky assets, and rebalance it regularly. The last point has more of a long-term focus, since harvesting and redistributing the gains of successful investments may stunt the growth, but it could also prevent you from losing as much when the winners experience a corrective downturn. Continue reading...
Fluctuations are represented in terms of volatility, and different types of investments experience different levels of volatility. The answer here depends on which market you’re talking about. Generally speaking, the capital markets in fixed instruments, such as government bonds, are the least volatile. Market fluctuations of the price of commodities, small-cap stocks, and emerging markets are the largest, and can be as high as 30-40% per year. Continue reading...