Tag: Investing

The Role of Misaligned Incentives in Economic Recessions

economy, Investing, Market Volatility

Fear of recession is causing current turmoil in stock prices. Recessions are often precipitated by an abrupt return to reality, a moment when the market corrects itself after a prolonged period of distorted perceptions and misaligned incentives. Historically, we have witnessed how such misalignments can lead to the mispricing of assets, which can ultimately culminate in significant economic downturns.

A Few ETFs You Must Own and 1,000 ETFs You’re Better Off Avoiding

ETF, Investing

When most people hear “ETF,” their first thought is usually “Index Fund.” For years, ETFs (Exchange-Traded Funds) have been synonymous with low-cost, passive investing. We love passive indexing, and we were early adopters of ETF’s as building blocks for portfolios. However, the reality of the ETF market today is far more complex and diverse as new fund offerings have become prolific. While the traditional index-tracking ETFs remain a staple, the industry has expanded significantly, introducing products that go far beyond simple market replication.

Why We Don’t Like Mutual Funds

funds, Investing

Segment has always run its own strategies. We build portfolios out of individual stocks and exchange-traded funds because they have exceptionally accommodative tax results. What we generally don’t buy is open-end mutual funds. These investment products with five digits in their ticker symbol are typical of what you would find in a retirement account like a 401(k).

The Intricacies of IRA Distributions: A Case Study of James Caan’s Hedge Fund Mishap

Investing, IRAs

Individual Retirement Accounts (IRAs) provide tax advantages for savers. However, managing these accounts can be a complex endeavor, particularly when it involves intricate investment vehicles like hedge funds. This complexity is exemplified in the case of the renowned actor James Caan and his investment in a hedge fund, which highlights the potential pitfalls of inadvertent IRA distributions.

Market Optimism

Investing, stock market

I’m a cynic when it comes to the nature of humans but an optimist when it comes to the nature of markets. To be a pessimist, I would have to believe that markets are somehow doomed or that people are irredeemable. Neither is true. And when I speak of being a human nature cynic, rest assured I’m putting myself in the same category. I’m not judging people from some lofty height; I’m in the muck with all the other sinners. However, I have a unique vantage point, and by observing my own mistakes and those of so many others, I have insight into what works and what doesn’t. One of my most strongly held and loudly professed beliefs is the wild advantage of sitting still.

Expect to Bleed at the Cutting Edge

Behavioral Finance, Investing, stock market

It is quite fun to try to predict the future and invest in companies in the sweet spot of your prognostications. Investing in long-term growth trends with short-term dislocations is a viable strategy, and we do this often. But finding the “next big thing” is entirely different and is fraught with pitfalls. Such positioning comes with great peril because the future is not that predictable. More importantly, it is also likely that other investors share your view already and beating you to the punch is what causes FOMO and will likely cause you to overpay.

Beware Self-Justification

Behavioral Finance, Investing

We all know that market timing doesn’t work. It is a fool’s errand to sell it all, hoping to buy it back lower. But the temptation to do so is heady when the market is in decline. When the near future looks scary, it’s easy to think that perhaps selling now and buying back later is a good idea this time. Fear encourages self-justifying arguments for bad decisions by wrapping them in something else.

Segment Unveils Initiatives to Navigate Market Volatility

Behavioral Finance, Investing, Market Volatility

With almost 40 years of investing experience, Baumgarten is revealing how he applies keen knowledge and his eye for tracking the latest financial developments to Segment Wealth’s advisory practice.

Resist ESG Investing

ESG, Investing

Environmental, Social & Governance (ESG Investing) is the new popular trend in investment evaluation whereby investors use non-financial factors to screen investment options. As it gains popularity for its feel-good effects, it is currently enjoying outsized results as investors jump on the bandwagon.

Long Live Volatility

Behavioral Finance, Investing

I often tell people that the best-performing investment clients have ‘faith in the future’ as their defining characteristic, and the worst-performing clients do not have that but instead, routinely give in to their fears. Are losses and chaos the “normal” state of things? Or is order and higher prices over time the “normal” state? I believe in the latter.

Thoughts and musings from my desk to you.