ebook essays pieces of the puzzle
Thursday, March 15th, 2012
more income

The post on Tuesday regarding dividend ETFs was quite popular, so I’ll go to the well again, this time reaching for yield in fixed income.  Above you can see the returns since the end of 2007 on five vehicles that deal in that category with all the names:  “high yield,” “low grade,” and “junk.”

I did this comparison because I had seen an AllianceBernstein blog posting that argued that this is one area where active managers are likely to outperform ETFs.  So, I ran the chart above, with the biggest mutual funds pitted against the biggest ETFs.  As you can see, the five-letter symbols won.  Given that the Morningstar ratings were pretty average for those mutual funds, there are probably others that really knocked the cover off the ball, but I didn’t look beyond these large offerings.

Given the loss of business to ETFs, you can expect to see mutual funds highlight those areas where positive performance comparisons can be found.

Of course, the most important decision for investors will be sizing their exposure to this volatile and hot asset class, but which vehicle to use can make a difference too.  (Chart:  Bloomberg terminal.)

analogies and anomalies

The latest installment on the blog looks at analogies and anomalies in investment analysis and discourse.  For further thoughts on the themes, see pieces on Abnormal Returns by Tadas Viskanta and Above the Market by Robert Seawright.  Those gentlemen should be on your regular reading list — they always add interesting perspectives, as they did in this case.  Thanks, guys.

investment brackets

It’s the opening morning of the round of 64 in the NCAA tournament and bracketologists everywhere still have hope.  Last year on this day, I had fun with the concept of investment brackets.  In the markets, we are battling against each other all of the time.  The last paragraph:  “What a business.  Let the games continue, without end.”