Last week, Tadas Viskanta of Abnormal Returns rounded up some of the best finance writers around to answer a series of questions. It’s always flattering to be invited to these series that include so many other great thinkers.
Below are my responses along with links back to the full set of responses.
Assume you are advising a pension fund, endowment or foundation. What is a reasonable long-term expectation for real returns for a well-diversified portfolio? Support as you see fit.
This depends on the definition of long-term and the asset allocation of the portfolio.
I usually think of “long-term” as two or three decades. Nearly all the pensions, endowments, and foundations we work with at Plancorp make decisions under the assumption they will operate in perpetuity.
Within this context, I’m comfortable assuming an average real return of 5% for a global stock portfolio and 1% for a well-diversified bond portfolio over the next 30 years.
Ten years have passed since the onset of the financial crisis. What about the past decade has changed your thinking about the economy, financial markets or investing?
I effectively knew nothing about markets or investing coming out of college in 2007, so basically all of my thinking has changed.
In 2007, I viewed investing as a daily activity. I read forecasts and religiously followed market news. I tried to outsmart the market through security selection. I traded too much and for all the wrong reasons. All of those things would conflict with my core investment values today.
Needless to say, I’m very lucky that nearly all of my savings during the first decade of my career went into a 401(k) plan that systematically invested in low-cost index funds. That protected me from destroying the benefit of compounding early in my career while allowing for some hands-on education in my small taxable account.
What ETF, if it were launched tomorrow, would you invest in with little (or no) hesitation? Said another way what asset class or strategy is not currently (effectively) available in an ETF wrapper?
I’d jump on an ETF version of DFA Global Equity Portfolio (DGEIX), which provides globally diversified stock exposure with factor tilts.
What company that is currently private would you most like to see go public? This could be for investment purposes, entertainment value or sheer curiosity.
I’d love to see a U.S. sports franchise go public – preferably MLB or NFL. I’d be most curious to see the impact on competitive balance. Other items of interest in this scenario would be proxy votes, shareholder meetings, stadium financing, and impact attracting free agents.
What blogger (let’s throw in podcasters as well) is now criminally underfollowed? Need not be finance/investment related.
I’m a big fan of the Novel Investor, which is an anonymous blogger that publishes twice a week. The blog focuses on learning about investing through the writings and experiences of others. Plenty of links to useful resources along the way, too.
On the Twitter front, @ROIChristie deserves several thousand more followers. Christie frequently comments on charts from an institutional investor’s perspective, publishes the occasional tweet storm, and adds a healthy dose of clever banter to the FinTwit community.