It almost seems like “conventional” wisdom; you should have a portion (typically 5%) of your portfolio in gold. The reasons for owning gold vary, but they tend to be highly emotional as opposed to rational.
It’s human nature to believe that we can get an edge on someone else. We haggle with the car seller to get a “steal of a deal.” We spend hours figuring out our fantasy football rosters-who to draft, who to play, in hopes of winning our league. Nowhere is this tendency more prevalent than in our investing behavior.
In our last piece in this series, “The Weight of Evidence,” we introduced three key stock market factors (equity, value and small-cap) plus a couple more for bonds (term and credit) that have formed a backbone for evidence-based portfolio construction. Continued inquiry has found additional market factors at play, with additional potential premiums.
Since higher fees have been shown to be detrimental to shareholders’ returns, you would think that an executive of an expensive fund would be reticent to talk with someone who tells his publicist “I plan to ask some tough questions about the funds’ portfolio and expense ratios and whether or not these meet the firm's fiduciary responsibilities to its clients.”
You’ve probably heard us whistle this tune so often that you can sing along yourself: Among the best ways to maximize expected returns is to minimize the costs involved in achieving them. This begs the question: What about those fees you pay to folks like us?