As regular readers will know, my wife and I bought a farmhouse in Connecticut when we moved up here
C.A.F.
To learn more about Epsilon Theory and be notified when we release new content sign up here. You’ll receive an email every week and your information will never be shared with anyone else.
Continue the discussion at the Epsilon Theory Forum
Participants
The Latest From Epsilon Theory
DISCLOSURES
This commentary is being provided to you as general information only and should not be taken as investment advice. The opinions expressed in these materials represent the personal views of the author(s). It is not investment research or a research recommendation, as it does not constitute substantive research or analysis. Any action that you take as a result of information contained in this document is ultimately your responsibility. Epsilon Theory will not accept liability for any loss or damage, including without limitation to any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Consult your investment advisor before making any investment decisions. It must be noted, that no one can accurately predict the future of the market with certainty or guarantee future investment performance. Past performance is not a guarantee of future results.
Statements in this communication are forward-looking statements. The forward-looking statements and other views expressed herein are as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements, and there is no guarantee that any predictions will come to pass. The views expressed herein are subject to change at any time, due to numerous market and other factors. Epsilon Theory disclaims any obligation to update publicly or revise any forward-looking statements or views expressed herein. This information is neither an offer to sell nor a solicitation of any offer to buy any securities. This commentary has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Epsilon Theory recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
I love this note. I think this speaks directly to some tailwinds driving the popularity of cap-weighted index funds. These products are easy for clients to understand. Cheap. Tax-efficient. Perhaps most importantly (to borrow this framework), the speakers always sound the way the client expects them to sound. Tracking error is hugely problematic for many clients and the less “familiar” the strategy (ahem alts) the more problematic “unexpected” results become for the FA/client relationship and indeed the client’s commitment to the plan. As usual there is no Answer for this but this is a heckuva good suggestion for a Process.
If you can’t help a client overcome his/her own particular behavioral vulnerabilities, it doesn’t matter how much alpha you can generate. In my experience, this is mostly achieved through the planning or pre-investment part of the process. Making sure the client doesn’t have too much of their net worth on the table when risk is expensive. Making sure that the client understands how much downside they can handle before it starts to impact their lifestyle & goals. Getting clear and rational about the real world objectives for the wealth we hope to create so that we can focus on outcomes rather than purely on relative returns. These are better starting places for addressing the CAF issue than portfolio construction.
Hi Rusty,
Just joined ET today. I was drawn in by the home entertainment dilemma you posed. I was getting ready to share what I think is a really good trade-off on cost, quality of sound, size and aesthetics. My mistake! Thanks for the advise to follow my own advise. Honestly, I have found that hard to do as the desire to optimize combined with fear of “what worked before (backtest) won’t work going forward”. The good news is that I am getting better at following my own advise as time goes by. Some people call that discipline, I think there is experience/wisdom in the mix.
Happy wintering:)
Tom