Podcast 4: A Returns-Based Approach
for Allocating U.S. Microcap
into Equities Portfolios

Categories Author: Jim O'Shaughnessy, Insight, Investing

“What Works on Wall Street” Podcast
Traditional asset allocation favors capacity-based frameworks that are overly-reliant on flawed market cap-weighted indexes. Also, that approach fails to make adjustments for investor risk tolerance or plan size…

Episode 4: This podcast series is now on iTunes, transcript below: Continue reading “Podcast 4: A Returns-Based Approach
for Allocating U.S. Microcap
into Equities Portfolios”

Humans are Unreliable Experts,
Getting in the Way of Outstanding Performance

Categories Author: Jim O'Shaughnessy, Insight, Investing

“What ails the truth is that it is mainly uncomfortable, and often dull.
The human mind seeks something more amusing, and more caressing.”

— H. L. Mencken

Given our current state of affairs, it seems like right now is a very good time for a refresher on Human Behavior — the one predictable thing in the market. Continue reading “Humans are Unreliable Experts,
Getting in the Way of Outstanding Performance”

Podcast 3: Finding the Factor Alpha in REITs

Categories Author: Jim O'Shaughnessy, Insight, Investing

“What Works on Wall Street” Podcast
According to our research — and apparently for no good reason — the efficacy of factor signals in real estate investing has largely been upstaged by the factor revolution in the equities market. In fact, the public real estate market is uniquely inefficient and a fertile ground for active, factor-based investing…

Episode 3 transcript: Continue reading “Podcast 3: Finding the Factor Alpha in REITs”

7 Traits for Investing Greatness:
#6 Probability vs. Possibility
#7 Discipline

Categories Author: Jim O'Shaughnessy, Investing

As I cautioned earlier (see Parts 1, 2, and 3), it’s harder than you’d think to stick with an Active approach to investing. Traits #6 and #7 (of 7 total) outline two more ways for Active investors to achieve greatness over the long term: Continue reading “7 Traits for Investing Greatness:
#6 Probability vs. Possibility
#7 Discipline”

7 Traits for Investing Greatness:
#2 Process, not Outcome
#3 Ignore Forecasts & Predictions

Categories Author: Jim O'Shaughnessy, Investing

Active investing is hard. Plus, there’s a strong temptation to join the “masses going Passive” — or else get left behind. Following up on the first part of this article, here are the 2nd and 3rd Traits (of 7 total) that I think are necessary to be a successful long-term Active investor: Continue reading “7 Traits for Investing Greatness:
#2 Process, not Outcome
#3 Ignore Forecasts & Predictions”

7 Traits for Investing Greatness:
#1 Long-Term Perspective

Categories Author: Jim O'Shaughnessy, Investing

Years of experience have taught me that becoming a successful Active investor is extremely difficult, requires a very specific set of characteristics, and that many investors attempting to actively manage their portfolios today lack the emotional and personality traits necessary for success.

Investors with Passive portfolios — presuming they are adequately and broadly diversified — face only one real point of failure: reacting emotionally to a market selloff and selling their holdings, often near a market bottom.  Continue reading “7 Traits for Investing Greatness:
#1 Long-Term Perspective”

Podcast 2: Microcaps’ Factor Spreads, Structural Biases, and the Institutional Imperative

Categories Author: Jim O'Shaughnessy, Insight, Investing

“What Works on Wall Street” Podcast
Many investors readily agree that alpha is scarce. It is hard to find, always in great demand, and requires skill to extract. The eclectic microcap universe provides a disparate group of continually evolving and devolving businesses with structural features that remain persistently attractive for investors…

Episode 2 transcript: Continue reading “Podcast 2: Microcaps’ Factor Spreads, Structural Biases, and the Institutional Imperative”

Podcast 1: Factor Crowding, Cobras,
and Other Market Hyperboles

Categories Author: Jim O'Shaughnessy, Insight, Investing

“When a measure becomes a target, it ceases to be a good measure.”
— Goodhart’s Law1

“What Works on Wall Street” Podcast
After reading as many as 18 different WSJ articles on the subject, it’s understandable why investors might be up in arms about the alleged perils of factor crowding. We hope this discussion allays some of those concerns…


Episode 1 transcript: Continue reading “Podcast 1: Factor Crowding, Cobras,
and Other Market Hyperboles”

Update: A Generational Opportunity

Categories Author: Jim O'Shaughnessy, Investing, U.S.

“We’ve got the secret sauce. It doesn’t work all the time perfectly, but you just look at where we go, milestone after milestone:
Never bet against America.”

— Warren Buffett (Jan. 19, 2017)1

Every time I feel short-term pain, I review the long-term data — going all the way back to 1871 in this case — and it helps me focus on the stock market’s long-term potential.  Continue reading “Update: A Generational Opportunity”