According to financial research, there are some systematic ways which are likely to improve investment Returns:
- “The Advantage of Value Investing” by Robert G. Kahl
- “How to Improve Fixed Income Returns with Closed-End Funds” by Robert G. Kahl
The CAPE ratio (cyclically adjusted price/earnings) has received increased attention in recent years as a valuation tool. The empirical evidence indicates that buying at low CAPE ratios generally results in higher returns and buying at high CAPE ratios results in lower returns.
“CAPE: Predicting Stock Market Returns” by Norbert Keimling, Head of Capital Market Research, StarCapital AG, February 2014. See the scattergram on page 4 for the relationship between CAPE and subsequent 15 year real returns. Read More.
“Everything You Need to Know About the CAPE Ratio” by Meb Faber, August 22, 2014. Read More.
StarCapital maintains a list of global stock market valuation ratios for major countries on its website. If you click on one of the column headers, it will sort the data based on that variable. Read More.
This website has the following graphs for the United States - S&P 500 (1881 – present): PE ratio, Shiller PE ratio, dividend yield, earnings, and real price. Click on the tabs at the top and note the current level compared to the median. Read More.
Small Cap vs. Large Cap
“U.S. Equities: Historical Trends of Large Caps vs. Small Caps,” by Jeremy Schwartz, Director of Research at WisdomTree Funds, October 22, 2013. Read More.
The Leuthold Group has a chart comparing the historical P/E ratios of small capitalization companies to large capitalization companies. For the years 1983-2013, the median premium of the P/E ratio for small cap companies is 2% over the P/E ratio of large cap companies. Read More
Asset Allocation - Real 10-Year Expected Risk & Return
Research Affiliates, LLC publishes their expected returns and volatility of various asset classes. If you put your cursor over one of the dots, it will expand to show the components of return. Click here.
Book Recommendations with Links to Amazon.com
The Intelligent Investor by Benjamin Graham
The Death of Money by James Rickard
The Investment Answer by Daniel C. Goldie & Gordon S. Murray
The Little Book of Behavioral Investing by James Montier