Jan. 10, 2021 6:56 pm ET
Do you care if a clerk at the drugstore gives you change in one $10 bill or two $5 bills?
Are you more reluctant to spend hard-earned dollars than windfall dollars?
Do you distinguish the “income” dollars paid as dividends on your stock from the “capital” dollars of the value of stock itself?
Rational investors answer “no” to each of the three questions. After all, money is money, and rational investors can easily distinguish between the substance of money and its form. Hard-earned dollars and capital dollars are no greener than windfall dollars and income dollars.
Normal investors, however, are likely to answer “no” to the first question, but many are sure to answer “yes” to the second and third questions.
Updated Jan. 10, 2021 9:00 am ET
When investors first read or hear the term “Brobdingnagian base” they might be taken aback. Not only is “Brobdingnagian” a mouthful to pronounce, it is a literary reference that at first glance might seem unrelated to finance.
But understanding what the phrase means could be beneficial because some analysts use it to describe potentially large profit-making opportunities in markets.
Coined in the early 2000s by John Roque, now a technical analyst at Wolfe Research in New York, the term combines two words: one from the world of letters (Brobdingnagian) and the other from the realm of finance (base).
U.S.-Stock Funds Rose 19.1% in a Grueling 2020
The average is less than it was in 2019, but it could be seen as more impressive considering what the economy and markets had to overcome last year
Stock-fund investors are enjoying gains, but are also cautious. That’s why they have been sending billions of dollars to bond funds. Illustration: Giacomo Bagnara By William Power
For a second straight year, stock-fund investors pocketed big gains. But their fingers are crossed.
Powered by a 19.0% rally in the fourth quarter, the average diversified U.S.-stock fund rose 19.1% for the year, according to Refinitiv Lipper data. That wasn’t as strong as the average 28.3% gain in 2019, but it could be seen as more impressive considering what the economy and markets had to overcome last year.
Jan. 8, 2021 8:58 pm ET
Contrary to reports in recent years that the small-cap effect has disappeared, itâs actually alive and well. Weâve just been looking for it in all the wrong places.
The small-cap effect refers to the long-term tendency of small-capitalization stocks to outperform the large-caps. Since the mid-1920s, according to data from Dartmouth finance professor Kenneth French, the 10% of stocks with the smallest market caps have beaten the largest 10% of stocks by an annualized margin of 2.4 percentage points.
Much of the past two decades have been an exception to this long-term pattern, however. Over the past 15 years, for example, the Russell Microcap Index (containing 2,000 of the tiniest exchange-listed stocks) lagged behind the Russell Top 50 Mega Cap Index (containing the 50 largest-cap stocks) by 2.5 annualized percentage points.
Public-service loan forgiveness for college loans: How it works and why some borrowers are missing out
Employees of a U.S. federal, state, local or tribal government or nonprofit organization can be eligible for public-service student loans. Shown, the campus of UCLA on Dec. 3. Photo: Image Of Sport/Zuma Press By Cheryl Winokur Munk Updated Jan. 9, 2021 9:00 am ET
Many student-loan borrowers are confused by the basic requirements of federal Public Service Loan Forgiveness, which could lead to missed opportunity.
The program, established by statute in 2007, has gotten a bad rap because of its complexities and because many student-loan borrowers thought they were on the path to forgiveness but weren’t. Instead, they learned, years later, that their payments didn’t qualify or that they were further away from forgiveness than they had thought.