gallery STORM OF LINKS – Advice from THE ROBOTs


Shane Hampton, from Hedgeable’s blog, starts with an interesting premise:

“My portfolio returned 8% in a year. Is that good?

The answer might not be as simple as you think.”

In fact, be it 8%, or 2%, or even 20%, investors should always refrain from seeing the world and, more importantly, assessing outcomes in absolute terms (who would not enjoy a 20% increase in the value of his holdings, from one year to the other?). On the contrary, the primary focus of a “savings allocator” (investor) should be on the relative basis (in such mindset, who you enjoy that 20% this much, if you knew that everyone else made 40%? … Of course, note that this applies for losses as well).


Therefore, the new concern for investors becomes the following: to what do I compare my portfolio performance?

The main warning here is not to be influenced by the mass media. In fact, despite everyday-news insist on only advertising the daily movements of major stock markets (including the well-known S&P500 or DOWJA), from the moment your portfolio contains other types of investing instruments, beyond “plain vanilla” stocks, such as bonds (which is most probably the case), you are probably much better off by benchmarking it (that is, comparing relatively) to the classic “60/40 portfolio” (i.e. 60% stocks and 40% bonds). Or, also, in case you are not entirely invested in US securities and rather also have an international exposure, probably the “global 60/40 portfolio” benchmark is right for you.

Following the same reasoning, you will notice that, to every benchmark chosen, corresponds a specific goal (and hence risk profile), which was set when building your portfolio.

Going from a conservative growth profile, to an aggressive one, you will be able to find a diagram containing 6 different benchmarks (associated with their corresponding investor risk profile), which represents a good starting point for those of you who are new to the concept of benchmarking.


If you are a fan of ETFs, than you probably have already heard about “commission free” ETFs. Nonetheless, as Andy Rachleff from Wealthfront remind us, the benefits for investors from these ETFs are not as straightforward as their name suggests.

A quick way to assess if these are suitable for you relies and depends on the frequency with which you trade the instruments in your portfolio. Of course, an investor with a portfolio characterised by high turnover and coupled with frequent investments of low amounts, should probably consider these alternatives.

However, the “no free lunch” concept applies here as well. As the author points out, these firms would not offer such generous terms if they were not getting something… somehow… in return. In order to understand how, Randy suggests that an obvious way to proceed is to look at Charles Schwab (suitable thanks to its quarterly and annual filings with the SEC).

He finally “unmasks” Charles Schwab’s practices, proving that these alleged savings made from the free-commissions, could also come with potentially greater future yearly costs , taking the form of higher expense ratios.

Here is an extract from the analysis:

“ For the Charles Schwab ETFs, the game is simple: Use the commission-free come-on as a way to get new customers in the door, where Schwab can make money from them multiple ways (expense fees on the funds, selling customer trades to high frequency traders, investing cash balances in proprietary, below-market money market funds, etc).”


Let us perhaps start with the most important message to be remembered from this article by Dan Egan (Director of Behavioural Finance & Investing at Betterment):

Recent returns give little information about (let alone, are an expectation of) future returns.

Perhaps due to the fact that we all have read this sentence thousands of times (yes, it is indeed similar the warning found in the majority of financial disclaimers out there), we still tend to put disproportionate weights on short-term performance and are more keen to acquire those funds / products that had the latest best performance.

Turns out, this is also a very disruptive strategy for your portfolio, as on average, such short-sighted behaviour (i.e. chasing the most recent “hot and sexy” stock) produces a future under-performance. The author’s analysis shows in fact that a simple “Buy-and-Hold” strategy beats a “performance chasing” one in every asset class, and in a variety of investing styles.


Then how to choose your money manager? Among the solutions (or rather “the right things to consider”) Daniel suggests to focus not only to focus on monetary cost, but also broaden your evaluation and include non-money costs (for instance: the time to be dedicated or stress incurred); not only the services offered but also the experience had and where their philosopohy fits yours. Of course, a consideration of Tax management and Behavior Management is required.

In the same spirit, Storm Of Beta also believes that an “ideal money manager” is also one that never breaks his vows …



Tim Ferriss: an overview

Timothy “Tim” Ferriss (born July 20, 1977) is an American author, entrepreneur, angel investor, and public speaker. He has written a number of self-help books which have appeared on the New York Times bestseller, Wall Street Journal, and USA Today bestseller lists, starting with “The 4-Hour Workweek“.

Ferriss is also an angel investor or an advisor to Facebook, Twitter, StumbleUpon, Evernote, and Uber, among other companies

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Stay tuned dear Storm-Troopers !

(Yes, this is indeed the term we coined for our loyal readers… Oh and yes, we are Star Wars fans).


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