You Asked, So We’ll Answer FOQ: They say the “yield curve inverted”? What does that mean? Short: Short-term bonds had higher interest rates than long-term bonds. Long: In particular, last Wednesday morning, the interest rate of the 2-year Treasury note very briefly exceeded the rate of the 10-year note. Think of these notes as CDs at the bank. You’d surely expect to get a higher interest rate from a 10-year CD than a 2-year CD, since you’re locking the money up for so much longer. But for a hot minute, that was not the case. FOQ: Does it matter …
Randomness: Why We Diversify
Can you guess what this represents? This table illustrates 20 years of annual equity returns for developed markets. Each color represents a different country. Each column is sorted top down, from the highest-performing country to the lowest. Here’s how the colors match to the countries: Why is this important? Pick a color in the first column and follow it through to the right. Does any country seem to follow a pattern that gives clues about its future performance? Not at all. But that won’t stop us from trying to find one. It’s in our blood. Psychologists call it the “Gambler’s …
Patience in Investing: 2019 Update
Recency Bias. It affects us all, particularly in investing. It’s the observation that we tend to give recent information greater weight than the long-term evidence warrants. And it’s certainly rearing its ugly head these days. We hit a peak last January and have been just meandering since. And the world is ending, or so you’d think. The four most dangerous words in investing are bubbling to the surface. This time it’s different. That’s what a sixteen-month span of not seeing any growth will do. Look below. Does it look any different? Nope. The market goes up, meanders, goes up, meanders…wash, …
Frequently “Oaked” Questions
You Asked, So We’ll Answer FOQ: Where can I stash money for a year or two and get a decent return, without risking it? Short: Nowhere Long: This one is as frequent as it gets. But unfortunately, risk and return are inextricably related, like yin and yang, peanut butter and jelly, Laurel and Hardy, or Tom Brady and winning (also, we’ll post a shout out in the next blog to whoever emails back the best “inextricable relationship”). We suppose the answer is relative – what does “decent” mean? You can find one year CDs for about 2.7% these days. …