Barry Ritholtz
Barry Ritholtz
Barry Ritholtz is an American author, newspaper columnist, blogger, equities analyst, CIO of Ritholtz Wealth Management, and guest commentator on Bloomberg Television. He is also a former contributor to CNBC and TheStreet.com...
NationalityAmerican
ProfessionAuthor
CountryUnited States of America
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Often, investors will discover a manager after he's had a terrific run, usually when he lands on a magazine cover somewhere. Invariably, funds swell up with new investor money just before they revert to their long-term averages.
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Investors tend to discover 'hot' mutual fund managers just after a successful run and just before the inescapable force of mean reversion is about to kick in.
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Hedge funds are not especially liquid. Many are 'gated' - meaning there are only small windows when you can withdraw your money. They typically have a high minimum investment and often require investors keep their money in the fund for at least one year.
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A hedge fund manager whose clients demand monthly performance reports has different needs than any individual investors with a 20-year time horizon. The needs of that long-term investor differ markedly from someone who is retiring in three years.
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Active management leads to lots of poor investor behavior. It sends people chasing after whoever has the hot hand at the moment.
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Good investors must learn to contextualize the daily background noise.
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Commissions add up, taxes are a big drag, margin ain't cheap. A good accountant costs money as well. The math on this one is obvious, yet investors often fail to recognize it: Keep your costs low and your turnover lower, and you will win in the end.
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Yearly data put the rest of the noise into perspective. Most of the weekly or monthly random up-and-down movements get smoothed out. Ultimately, this is where long-term investors should be focused.
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You can't fight the bond market. There's only so much the Fed can do. If investors are more concerned about economic growth slowing down in the future than inflation, they will flock to bonds.
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We see inflation rearing its head across the board. Contrary to what a lot of people have been saying, it's not just energy.
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Earnings have been coming in across the board pretty good, but the problem hasn't been earnings. The issue is the forward-looking statements for the fourth quarter or 2006. Despite good numbers, you see some stocks getting punished. It's a function of the outlook.
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There's still upside in tech but it's going to be more grudging and grinding and choppy, it's not going to be this moon shot that we saw a year ago.
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Tech stocks are probably a little pricey. But they're not stupid pricey.
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Every buck that they are forced to spend elsewhere is that much less money (spent) on other issues. With technology it may not fall dollar-for-dollar, but you have to think that it's going to pinch a little bit.