• 401ks,  Adams Financial Concepts,  Financial Planning,  Return on Investment

    Why Do Financial Plans Fail?

    You have likely heard of Financial Planning, and you may even be using it yourself for retirement planning, building net worth, providing for education, etc. Although it has become a very popular way to design portfolios, I believe that traditional Financial Planning has five specific fatal flaws: Plans do not adequately provide a margin of safety for black swan events. Plans use averages which work well during normal times but are not geared to deliver a margin of safety for times like the Great Recession of 2007-2009 or the high inflation times of the 1970s. Plans use probability models which are not reflective of actual market probability. Probabilities are calculated…

  • Adams Financial Concepts,  Current Events,  Return on Investment,  The Investment Industry

    What Is Factor Investing?

    The latest fad in investing is “Factor Investing”, according to the August edition of Financial Adviser Magazine. Like a bad fad diet, these investment methods come around every few years (factor investing dates back to the 1970s[1]) and claim to have found a method for stock picking that will win every time. Factor investing relies on five genuine factors which are, according to academics, Value, Quality, Momentum, Size, and Volatility. When it comes to understanding investment methodologies, I find it helpful to imagine them along a line: I am an active investor. Does this top-down investment methodology work? I don’t think so; as an active investor with a bottoms-up approach,…