The end of the year is a good time to look back and take stock. What Enterprising Investor articles did readers find most compelling in 2016? The results are illuminating. Our top content runs the gamut from the granular — tightly focused, practice-oriented material on starting a firm and what to read to stay informed — to more "big picture" analysis on negative interest rates and the ongoing active vs. passive debate. Taken together, they reflect the currents at work in the investment management profession at both the system-wide and individualized levels.
Highlights from November include a critique of modern portfolio theory (MPT) by Hansi Mehrotra, CFA; a primer on inflation-linked debt explained by Jason Voss, CFA; a few examples of how investors can add value over a preferred stock index fund from David Allison, CFA, CIPM; and an analysis by Ron Rimkus, CFA, on whether a US recession is to be expected in 2017.
Preferred stock index funds are a double-edged sword, says David Allison, CFA, CIPM. They are a simple, liquid, and low-cost way for investors to gain exposure to preferreds, but their simplicity makes them a blunt tool and harbors risks.
Investment professionals recognize that the markets are messy places, filled with less than rational participants. From their perspective, this can obviate any further discussion about the value of academic finance and its models. But this puts too high a threshold on the measure of academia.
By far the biggest hurdle to handicapping or investing is recognizing when basic conditions have changed, be they rule changes, unexpected weather, personal issues of the professionals, or any number of other fluctuations. From an investment viewpoint, I believe 2015 experienced such cumulative changes that made many of our old approaches less useful.
Is it just me, or does it seem that hardly a week goes by without another study or article about diversity in the workplace making headlines? I don't have the answer, but it did make me wonder whether I was suffering from “frequency illusion” or "recency illusion," also known as the Baader-Meinhof phenomenon.
If you're a regular reader of these roundups, you'll know that I love language. And hopefully by now you've also come to expect the unexpected when reading through my selections. This week's gem comes from Dwight Garner's review of a recently updated version of Marco Pierre White's White Heat.
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