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    Positive Expected Returns

    Positive Expected Returns

    “What’s the stock market going to do?” If you have read our past newsletters, you know that we are not market prognosticators. It is difficult for anyone to predict future market movements with any accuracy or consistency, and we make no attempt to do so in our approach to portfolio management. Nevertheless, academic theory suggests that the expected return in the market is always positive. How can this be? An investor who is completely risk-averse will invest solely in U.S.
    Market Complacency

    Market Complacency

    Since 2012, the stock market has demonstrated below average volatility and positive returns, potentially lulling investors into a false sense of complacency. It is human nature to extrapolate recent market performance into the future, so when the market has been tranquil, we expect it to continue in the same way. But could this be the calm before the storm? Academic research has shown that market volatility is not a reliable predictor of future returns. Nevertheless, we shoul
    Why Invest in Stocks?

    Why Invest in Stocks?

    Why do we invest in stocks? Stocks are risky. Why not just buy U.S. treasury bonds and get a guaranteed rate of return backed by the full faith and credit of the U.S. government? We invest in stocks because we are seeking a higher rate of return and are willing to tolerate the volatility of the stock market in order to get that return. This illustrates a fundamental tenet of modern finance, the idea that risk and return are inextricably linked. However, when it comes to inves
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