https://www.investinginevidence.co.uk/blog daily 0.75 2026-04-02 https://www.investinginevidence.co.uk/blog/market-concentration-and-valuations-historical-perspective-and-implications-for-expected-returns monthly 0.5 2026-03-28 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/8b17c73c-ce6f-478c-82d6-a0d214e6ba2d/Screenshot+2026-03-20+162554.png Blog - Market Concentration and Valuations: Historical Perspective and Implications for Expected Returns - Make it stand out Figure 1. This chart taken from Bogdanova (2026) highlights how much of the S&P 500’s returns were derived from a handful of larger firms. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/b1a35f06-9995-4a24-aef8-78750f1a2ffe/Screenshot+2026-02-27+171501.png Blog - Market Concentration and Valuations: Historical Perspective and Implications for Expected Returns - Make it stand out Figure 2. This chart taken from Felix (2026) shows that there is a slight relationship between market concentration and subsequent 10-year returns, but that this is statistically insignificant. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/b55e8237-8d23-4b4c-8fb7-c91adb3335a7/Screenshot+2026-03-02+210154.png Blog - Market Concentration and Valuations: Historical Perspective and Implications for Expected Returns - Make it stand out Figure 3. Dividend Yield vs Subsequent 10-Year Stock Returns. This chart shows the historical relationship between dividend yields and subsequent 10-year annualised real returns for US stocks, based on data from Nobel Laureate Robert Shiller. Each cross represents a single year between 1920 and 2013. For each year, we plot: X-axis: The dividend yield at the start of the year (calculated as dividends divided by the S&P Composite Index price). Y-axis: The annualised return over the next 10 years, adjusted for inflation. The dashed line is a trend line showing the overall relationship between these two variables. What the Chart Tells Us The chart hints at a modest relationship between dividend yields and subsequent 10-year returns. The trend line slopes upwards, indicating that, on average, years with higher dividend yields have been followed by somewhat better long-term returns. When dividend yields were high (for example, above 4%), the crosses tend to appear higher on the chart, indicating stronger real returns over the following decade. When dividend yields were low (below 2%), future returns were often weaker, though with considerable variation. Whilst the pattern is far from precise, it supports the general idea that valuation matters: when investors pay less for a dollar of dividends (higher dividend yield), their future returns have historically tended to be higher, on average. https://www.investinginevidence.co.uk/blog/negative-returns-are-normal monthly 0.5 2026-03-28 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/0732437d-cb3a-46a3-809d-aaf146973035/Screenshot+2026-02-27+115529.png Blog - Negative Returns Are Normal - Make it stand out Figure 1. See Vanguard (2025) https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/c145f21f-0be0-4644-9d7e-f1bf20bd24a8/output+%282%29.png Blog - Negative Returns Are Normal - Make it stand out Figure 2. An illustrative example of the probability of negative returns. https://www.investinginevidence.co.uk/blog/inflation-swaps-in-a-short-duration-bond-fund monthly 0.5 2026-02-14 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/65a11b87-0b38-4b8e-8f8f-e9b78bee7af0/image.png Blog - Inflation Swaps In A Short-Duration Bond Fund - Make it stand out Figure 1. Dimensional Fund Advisors Ltd. (2024) ‘Dimensional launches Sterling Short Duration Real Return Fund’, 1 May. https://www.investinginevidence.co.uk/blog/short-rates-vs-long-rates-why-central-banks-dont-set-mortgage-rates monthly 0.5 2026-01-24 https://www.investinginevidence.co.uk/blog/the-value-premium-why-cheap-stocks-have-tended-to-win-long-term-but-why-it-often-feels-dead monthly 0.5 2026-03-02 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/2cbbe587-68f8-418a-8091-58c8a82cc51b/value_premium_positive_negative_v2.png Blog - The Value Premium: Why ‘Cheap’ Stocks Have Tended to Win Long-term, but Why the Premium Often Feels ‘Dead’ - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/b1vtmggl5ra5qink6v7dursmv8al2f monthly 0.5 2026-01-06 https://www.investinginevidence.co.uk/blog/sharpes-arithmetic-revisited-when-average-active-might-beat-average-passive-before-costs monthly 0.5 2026-01-03 https://www.investinginevidence.co.uk/blog/nominal-vs-real-yield-curves-understanding-inflation-protection monthly 0.5 2026-03-31 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/2b7a8d03-006e-4d47-a875-35e5974be6e0/InvestingInEvidence_Nominal_vs_Real_Yield_Curves.png Blog - Nominal vs Real Yield Curves: Understanding Inflation Protection - Make it stand out Figure 1. This chart shows an illustrative example of the nominal and real gilt yield curves across different maturities. Both slopes rise gradually as maturities extend, reflecting the higher returns investors usually require for locking up money for longer time horizons. The real yield curve sits noticeably below the nominal one because index-linked gilt cashflows are already protected against inflation, so the quoted yield represents a return after inflation has been accounted for. The vertical gap between the two curves is the breakeven inflation rate, which reflects the market’s view on future inflation along with the value placed on inflation protection. Taken together, the two curves highlight how the market separates the real return investors demand from the compensation they expect for inflation. https://www.investinginevidence.co.uk/blog/the-main-components-of-bond-returns-carry-roll-down-and-the-yield-curve-surprise monthly 0.5 2026-03-26 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/748fd58d-22e4-4afb-b887-acbdddbc521b/roll_down_effect_clean_no_boxes.png Blog - The Main Components of Bond Returns: Carry, Roll-down, and the Yield-curve Surprise - Make it stand out Figure 1. Explaining the concept of roll-down. The chart highlights a bond bought at 5 years to maturity and, one year later, the same bond now being a 4-year. Because the curve slopes upwards, the 4-year yield is lower than the 5-year yield, shown by a vertical double-headed arrow labelled ‘Roll-Down’. That yield drop is the intuition behind roll-down: as the bond ‘slides’ down the curve to a shorter maturity, its yield tends to fall, which implies a price rise (a capital gain), all else equal. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/d4053bf0-2ee9-486e-b45b-920297accd19/yield_curve_shapes_smooth_clean.png Blog - The Main Components of Bond Returns: Carry, Roll-down, and the Yield-curve Surprise - Make it stand out Figure 2. An illustrative example of different shapes of yield curves. The chart shows yield (%) on the Y axis and maturity in years on the X axis (1y, 2y, 5y, 10y, 20y, 30y). Each line is a different shape that the yield curve can take: Normal curve (upwards sloping): yields are lower at short maturities and higher at long maturities. The line rises from left to right. The intuition is that investors usually demand a higher yield to lend for longer because longer maturities carry more inflation and interest-rate (duration) uncertainty (a positive term premium). Flat curve: yields are roughly the same across maturities. The line is close to horizontal. Normally, longer bonds carry a positive term premium (extra yield for duration and inflation uncertainty). In a flat curve, that premium is small, or it’s being offset because investors are willing to accept less extra yield (pay a higher price) to lock in longer rates (often when uncertainty is high and there’s demand for ‘safe’ duration). Inverted curve (downwards sloping): yields are higher at short maturities and lower at long maturities. The line falls from left to right. The intuition is that longer-term bonds’ prices are bid up as there is higher demand for this ‘safer’ investment as investors do not feel that they can get a better-returning investment for a given level of risk tolerance. Shorter-term bond prices may also be bid up as investors move out of riskier assets like stocks but this will not be to the same extent as longer-dated bonds. Remember, in equilibrium the return of both, i.e., price returns and coupon payments should be equal for both at maturity and prices must reflect this. Therefore, an inverted yield curve suggests investors have low confidence in the economy and that they expect central banks will soon need to cut interest rates in response to a recession. https://www.investinginevidence.co.uk/blog/what-equity-returns-really-are monthly 0.5 2025-12-22 https://www.investinginevidence.co.uk/blog/cash-accruals-intangibles-and-sector-effects-what-really-separates-avantis-and-dimensional monthly 0.5 2025-12-16 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/f2535fa7-891c-4e44-859d-fe1996030be3/ChatGPT+Image+Dec+12%2C+2025%2C+04_37_05+PM.png Blog - Cash, Accruals, Intangibles and Sector Effects: What Really Separates Avantis and Dimensional? - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/the-total-costs-of-investing monthly 0.5 2025-12-07 https://www.investinginevidence.co.uk/blog/quantitative-easing-stablecoins-and-bitcoins-fixed-supply-why-neither-crypto-solution-fixes-the-money-problem monthly 0.5 2026-03-06 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/a7ab68aa-a70d-410f-b1aa-3f2c3058c0dc/ChatGPT+Image+Nov+18%2C+2025%2C+09_08_04+PM.png Blog - Quantitative Easing, Stablecoins, and Bitcoin’s Fixed Supply: Why Neither Crypto ‘Solution’ Fixes the Money Problem - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/3b7bcd9e-be6b-4e86-a880-2b03b9d79264/ChatGPT+Image+Nov+18%2C+2025%2C+09_13_22+PM.png Blog - Quantitative Easing, Stablecoins, and Bitcoin’s Fixed Supply: Why Neither Crypto ‘Solution’ Fixes the Money Problem - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/private-assets-evidence-access-and-implications-for-investors monthly 0.5 2025-10-29 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/857f63bf-df87-44cd-a5bd-0c5033693c1d/ChatGPT+Image+Oct+26%2C+2025%2C+12_07_39+PM.png Blog - Private Assets: Evidence, Access and Implications for Investors - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/568618f5-3793-4954-ae2e-6d8eca434ac9/dispersion_private_vs_public_site_style.png Blog - Private Assets: Evidence, Access and Implications for Investors - Make it stand out Figure 1. Dispersion between top and bottom quartiles of private equity and public equity fund managers between the vintages of 2012-2021. Data taken from Meketa Capital (2024). https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/9c344bd0-181d-4421-9f09-8f9d51eda875/Picture1.png Blog - Private Assets: Evidence, Access and Implications for Investors - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/4ba3a0fc-cf92-48d5-84c5-ff5ef852badd/Picture1.png Blog - Private Assets: Evidence, Access and Implications for Investors - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/how-long-would-an-active-fund-manager-need-demonstrate-outperformance-for-to-be-confident-in-their-results monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/84f525d5-1e38-408d-baf8-744bc06e486d/ChatGPT+Image+Oct+19%2C+2025%2C+03_31_14+PM.png Blog - How Long Would an Active Fund Manager Need to Demonstrate Outperformance to Be Confident in Their Results? - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/profitability-and-investment-premia-what-famafrenchs-quality-factors-mean-for-investors monthly 0.5 2026-04-02 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/eae64341-7e7f-492e-b081-4658941b910d/output.png Blog - Profitability and Investment Premia: What Fama–French’s ‘Quality’ Factors Mean for Investors - Make it stand out Figure 1. Profitability vs Book-to-Market (Fama–French Factor Returns, 1963–2025). Both axes are in monthly percentage returns. Each X on the chart represents one month of data between July 1963 and 2025. X-axis value (RMW): how much the high-profitability stocks outperformed (or underperformed) the low-profitability stocks in that month, measured as a monthly factor return in percent. Example: if RMW = +0.8, then robustly profitable stocks beat weakly profitable stocks by 0.8% that month. If RMW = –0.5, weakly profitable stocks actually outperformed by 0.5%. Y-axis value (HML): how much the value stocks (high book-to-market) outperformed (or underperformed) the growth stocks (low book-to-market) in that same month. Example: if HML = +1.2, value beat growth by 1.2% that month. If HML = –0.7, growth outperformed by 0.7%. So, taken together, the scatter shows how the monthly profitability premium and the monthly value premium moved together over more than 700 months. The lack of a clear slope (and a correlation coefficient of only ~0.17) is why we say profitability is essentially uncorrelated with value. This tells us that highly profitable firms are often priced like growth stocks (low B/M), so profitability doesn’t overlap with value. That’s why in the Fama–French five-factor model, profitability adds explanatory power beyond value. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/318fa280-55b9-4361-866c-8c538e26b76a/Screenshot+2025-10-01+150439.png Blog - Profitability and Investment Premia: What Fama–French’s ‘Quality’ Factors Mean for Investors - Make it stand out Figure 2. Fama–French Five-Factor Model regression. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/5dcdd38e-d8c1-4a92-a7b5-25f956dbc62c/output.png Blog - Profitability and Investment Premia: What Fama–French’s ‘Quality’ Factors Mean for Investors - Make it stand out Figure 3. Dimensional Global High Profitability Lower Carbon ESG Screened Fund regression*. *Based on 9 months’ of data so the results will be skewed due to the lack of data points. Ideally, I would use at least 3 years’ of data but the fund is less than a year old as of September 2025 so this is not possible. What the regression is doing: I regressed the fund’s excess returns (fund return minus risk-free rate) on the Fama–French 5 factors (plus alpha): Each coefficient (β) tells you how sensitive the fund is to that factor. Interpreting the coefficients we’ve got for this fund: Alpha: Slightly negative, close to zero. Suggests no evidence of excess return unexplained by the Fama–French 5 factors. MKT (~1.45): The fund loads more than one-for-one on the market factor. A coefficient > 1 just means it is more volatile / more sensitive to market moves than the market portfolio itself. This is quite normal for equity funds that take on systematic tilts (like profitability, smaller size, or non-US weightings). Think of it like a beta in the CAPM: >1 means higher market risk exposure. SMB(~–0.6): Negative loading on size → fund tilts to large-cap stocks. HML (~0.5): Mild positive value tilt. Even though it’s branded ‘profitability,’ Dimensional often blends exposures to avoid uncompensated risks. RMW(~0.75): Strong positive exposure to profitability. This is exactly what you’d expect. CMA (~–0.8): Negative investment loading, meaning preference for firms that invest more aggressively (not conservative investors). This is common for high profitability tilts. Why can the Market (MKT) coefficient be > 1? The regression coefficients are not constrained to 0–1; they reflect best fit to the historical data. A βMKT > 1 means that the fund moves more than the market: If the market goes up 1%, this fund tends to move ~1.45%. If the market goes down 1%, same idea. Reasons for this: The fund has systematic tilts (profitability, some value) that increase volatility relative to the market in question. The fund may also have a different regional mix than the market in question (e.g., more small/mid caps, more ex-US exposure). Statistically, if the other factors don’t fully capture variation, the market factor absorbs it, pushing β above 1. See the appendix for further details on this phenomenon. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/11c071bb-7ec0-455f-a8dd-20bf506c99df/output.png Blog - Profitability and Investment Premia: What Fama–French’s ‘Quality’ Factors Mean for Investors - Make it stand out Figure 4. iShares Edge MSCI World Quality Factor regression. The iShares ‘Quality’ fund does not load strongly on the Fama–French profitability (RMW) or investment (CMA) factors. This is because MSCI defines quality using a composite of return on equity, earnings stability and low leverage, which differs from the academic construction of profitability and investment premia. The result is a fund that looks much closer to the market, with only modest tilts, despite the ‘quality’ label. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/36b4b786-28fb-4664-8993-6dfa50728494/output.png Blog - Profitability and Investment Premia: What Fama–French’s ‘Quality’ Factors Mean for Investors - Make it stand out Figure 5. Vanguard Global Value Factor regression. The regression shows a clear value tilt (HML ≈ 0.4) alongside a size tilt (SMB ≈ 0.5), providing indirect exposure to the investment factor (CMA) given the overlap between conservative investment and value. However, there is only modest direct exposure to the profitability (RMW) and investment factors. Market exposure is below one, reflecting diversification but still broadly market-like behaviour. Alpha is negligible, suggesting returns are well explained by the Fama-French five-factor model. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/1883afbc-2e91-46da-8f6a-6508ff8cdafc/output.png Blog - Profitability and Investment Premia: What Fama–French’s ‘Quality’ Factors Mean for Investors - Make it stand out Exhibit 1: The Impact of Omitting a Risk Factor This chart is based on a simple simulation. We created a hypothetical ‘fund’ whose returns depend on two true factors: The market (MKT) with a coefficient of 1.0 and momentum (MOM) with a coefficient of 0.8. Alpha was set to zero. The orange bars show the absolute true coefficients. In other words, if we could truly know what was driving returns, for example, if a God or greater power were to tell us, these would be the beta coefficients we would see. Of course, in reality, we do not have a God or greater power telling us the answers and so we can only develop models that approximate for true coefficients (reality) and it is much harder to know the absolute ‘truth’ vs an approximate ‘truth’. The blue bars are our model estimates of the ‘truth’—the coefficients when you include every factor, in this simpler example, momentum and the market. The green bars are estimates of the coefficients when momentum is left out, in which case the MKT stretches above 1 and alpha stays flat. Full model (blue bars): The regression includes both MKT and MOM. It recovers the coefficients almost perfectly, with α ≈ –0.03, βMKT ≈ 0.96, and βMOM ≈ 0.79. This demonstrates that the regression works well when all relevant factors are included. Omitted model (green bars): The regression includes only MKT, leaving out MOM. With no way to account for momentum’s time-varying swings, the regression inflates the market beta to ≈ 1.04 to soak up some of the missing variation. Alpha remains close to zero, because a flat intercept cannot capture the ups and downs of an omitted factor. The MOM column is blank, as momentum is not included in this regression. In other words, returns are being falsely attributed to MKT in this scenario. The chart highlights two crucial points: ‘Market beta inflates when momentum is missing’—omitted systematic risks distort betas. ‘Alpha stays flat—cannot capture omitted factor’—alpha can only absorb a constant shift, not dynamic co-movement. This illustrates why we sometimes observe market coefficients greater than one: the regression is forcing the market factor to do extra work to minimise errors when another systematic driver of returns has been left out. Food for thought on whether funds that return large MKT betas actually contain exposure to other systematic risk factors that are not included in the Fama-French five-factor model. https://www.investinginevidence.co.uk/blog/understanding-fund-manager-benchmarks-arc-ia-sectors-and-beyond monthly 0.5 2025-09-20 https://www.investinginevidence.co.uk/blog/understanding-the-different-equity-indices monthly 0.5 2025-09-20 https://www.investinginevidence.co.uk/blog/the-size-premium-myth-why-small-may-need-friends monthly 0.5 2025-11-23 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/5f72573a-2859-4d69-ba46-e25ad3502e1e/CAPM_Scatter_US_exUS_TARGET_GREY_nogrid_legendOutside.png Blog - The Size Premium Myth? Why Small May Need Friends - Make it stand out Figure 1. The scatter plots compare the average monthly excess returns (portfolio returns minus the risk-free rate) of the 25 size–value portfolios (constructed by Fama and French) with their estimated market betas from July 1990 to June 2025. Each dot represents a portfolio. For example, US small-cap growth or ex-US large-cap value and the dashed lines are the Security Market Lines (SMLs) implied by the Capital Asset Pricing Model. The SML is simply the line we would expect if market beta alone explained returns: portfolios with higher betas should lie above those with lower betas, with a slope equal to the average market excess return (market return minus the risk-free rate). https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/432fd511-9375-4b70-aacc-6e0d622d8085/CAPM_Scatter_US_1963_BLUEValue.png Blog - The Size Premium Myth? Why Small May Need Friends - Make it stand out Figure 2. The chart plots the average monthly excess returns of the 25 US size–value portfolios against their market betas, from July 1963 to June 2025. Each red circle represents a portfolio, whilst the dashed line shows the Security Market Line implied by CAPM. The highlighted points tell the story: US small-cap value stocks (green) sit clearly above the line, earning much higher returns than their betas would predict. US small-cap growth stocks (red) fall well below it, delivering poor returns for their level of risk. Among large caps, value (blue) earns a modest premium above the line, whilst growth (magenta) hovers close to or just below it. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/31847ea2-bdc6-40d0-936e-ac7f8a26178e/SMB_Market_US_vs_ExUS.png Blog - The Size Premium Myth? Why Small May Need Friends - Make it stand out Figure 3. The chart shows the cumulative growth of $1 invested in the size premium (SMB factor) and the market factor (Mkt–RF), for both the US and developed ex-US markets, from July 1990 to June 2025. The two dashed lines represent the market excess return factors. A dollar invested in the US market (in excess of the risk-free rate) has grown more strongly, reaching over six times its initial value, whilst the developed ex-US market has delivered lower but still positive growth, roughly tripling over the same period. This reflects the long-run outperformance of US equities relative to other developed markets. The solid lines show the size premium (SMB: small minus big stocks). Here the picture is very different. Both in the US and ex-US data, a dollar invested in the SMB factor has delivered little to no growth over 35 years. In fact, the US SMB factor has trended slightly downwards since the mid-2000s, while the ex-US SMB factor has oscillated around flat. What This Means The market premium has been robust across regions—stronger in the US, but visible ex-US too. The size premium on its own has not delivered: small stocks as a group have not outperformed large stocks consistently, especially in the US where the SMB factor has been negative for longer. This reinforces the earlier point from the CAPM scatter plots: the ‘size effect’ is not a stand-alone source of return. It is most effective when combined with value, as small-cap value portfolios show clear outperformance relative to both CAPM predictions and other style groups. https://www.investinginevidence.co.uk/blog/the-long-shadow-of-1989-japans-markets-against-the-developed-world monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/0a8d6139-6d20-4594-8c62-775b604b3fb9/nikkei_vs_sp500_1960_2025_clean.png Blog - The Long Shadow of 1989: Japan’s Markets Against the Developed World - Make it stand out Figure 1. This chart shows the cumulative performance of the Nikkei 225 and the S&P 500 price indices from 1960 to 2025, normalised to 1.0 at the start. The Nikkei surged through the 1970s and 1980s, peaking dramatically in 1989 at the height of Japan’s asset price bubble, before entering a long period of stagnation and volatility. By contrast, the S&P 500, though punctuated by downturns such as the dot-com crash and global financial crisis, has compounded steadily and surged since 2010, leaving it far ahead of Japan over the long run. It took until 22nd February 2024 for the Nikkei to set a new landmark by surpassing its 1989 peak. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/f9d85bd1-5595-4106-9497-69bc107b3bfe/bond_yields_1960_2025_hattori.png Blog - The Long Shadow of 1989: Japan’s Markets Against the Developed World - Make it stand out Figure 2. The chart tracks 10-year government bond yields for the U.S., U.K., Germany, and Japan from 1960 to 2025, highlighting both their common patterns and Japan’s unique path. Yields in the U.S., U.K., and Germany climbed steadily through the 1960s and 1970s, peaking above 15 per cent in the early 1980s as inflation surged, before entering a four-decade decline that saw European yields dip into negative territory by the late 2010s. Japan followed a similar pattern until the mid-1980s, estimated using Hattori’s data pre-1980, before diverging sharply. Japanese yields collapsed to near zero by the late 1990s and were held there by deflationary pressures and Bank of Japan policy, in stark contrast to other developed markets. The recent uptick in yields since 2021 is visible across all four regions, but Japan remains lower than its peers. https://www.investinginevidence.co.uk/blog/emerging-market-equities-returns-risk-and-the-long-view monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/c7e6f699-6bbc-400f-ab28-551e7abdf486/output.png Blog - Emerging Market Equities: Returns, Risk, and the Long View - Make it stand out Figure 1. The historical performance of emerging market equities, as captured by the MSCI Emerging Markets Index compared to developed market equities, represented by the MSCI World Index. Over the past five and ten years, developed markets have clearly led, whilst over twenty years emerging markets have been stronger. Since 1988, both have delivered broadly similar annualised returns, though the path for EM has been much bumpier. https://www.investinginevidence.co.uk/blog/are-us-equities-in-a-bubble-or-just-priced-for-a-different-world monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/b790532f-b254-4702-a1df-ffafd1a59889/ChatGPT+Image+Aug+18%2C+2025%2C+08_42_04+PM.png Blog - Are US Equities in a Bubble? Or Just Priced for a Different World? - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/75d6a13a-65c5-4c40-8a4d-6411afd6d268/shiller_cape_1950_2025.png Blog - Are US Equities in a Bubble? Or Just Priced for a Different World? - Make it stand out Figure 1. Line chart of the Shiller cyclically adjusted price–earnings ratio for the US market from 1950 to 2025. CAPE fluctuates between roughly 7 and 44. It rises through the 1960s (peaking around the low-20s), falls to single digits in the late 1970s and early 1980s, surges to an all-time high near the turn of the millennium (~44), compresses around 2009 (~15), then trends higher through the 2010s and early 2020s, ending in the high-30s in 2025. Source: Robert J. Shiller, ‘Online Data,’ Yale University; accessed 18 August 2025. https://www.investinginevidence.co.uk/blog/do-lower-investment-fees-lead-to-greater-wealth monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/de19134e-19a3-4701-8e4b-71f95409a584/impact_of_fees_highres.png Blog - Do Lower Investment Fees Lead to Greater Wealth? - Make it stand out Figure 1. The impact of fees on the long-term growth potential of an investment portfolio starting at £100,000. https://www.investinginevidence.co.uk/blog/the-paradox-of-financial-research-why-smart-people-disagree monthly 0.5 2025-10-19 https://www.investinginevidence.co.uk/blog/understanding-key-financial-ratios-in-modern-portfolio-theory monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/eba44f86-9f22-4c4b-a4dd-625113560d76/ChatGPT+Image+Jul+22%2C+2025%2C+11_20_09+AM.png Blog - Understanding Key Financial Ratios in Modern Portfolio Theory - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/does-gold-deserve-a-place-in-your-portfolio monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/6a7221c7-72a7-4135-a772-99f85c20c25f/output.png Blog - Does Gold Deserve a Place in Your Portfolio? - Make it stand out Figure 1. This chart shows how $100 invested in the S&P 500, gold, 10-year US Treasury bonds, or 3-month Treasury bills grew over time. Equities clearly dominate, turning $100 into nearly $1 million. Gold and bonds preserved capital but lagged significantly. Even small differences in annual return compound into huge gaps over long periods. Data taken from Damodaran (2024). https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/0263e572-72b6-4935-8cb7-ea529b97b231/ChatGPT+Image+Jul+21%2C+2025%2C+09_51_50+AM.png Blog - Does Gold Deserve a Place in Your Portfolio? - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/factor-investing-in-fixed-income monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/9ad6e1bd-6994-40fb-a47d-f8e31f1dc618/ChatGPT+Image+Jul+19%2C+2025%2C+04_21_43+PM.png Blog - Factor Investing in Fixed Income - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/da118211-c1b4-4040-8b92-122d09e8c091/ChatGPT+Image+Jul+19%2C+2025%2C+04_24_10+PM.png Blog - Factor Investing in Fixed Income - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/2c27fdd4-97dc-40da-aa7b-b31a292c75d1/ChatGPT+Image+Jul+19%2C+2025%2C+04_28_57+PM.png Blog - Factor Investing in Fixed Income - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/what-does-a-good-financial-decision-look-like monthly 0.5 2025-11-23 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/c4249094-8abb-4247-8641-b3405f00953b/ChatGPT+Image+Jul+18%2C+2025%2C+09_20_25+AM.png Blog - What Does a Good Financial Decision Look Like? - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/6bdb7303-a680-44f2-8e01-cce6d48162ea/ChatGPT+Image+Jul+17%2C+2025%2C+08_26_08+PM.png Blog - What Does a Good Financial Decision Look Like? - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/home-bias-in-asset-allocation-a-rational-case-for-some-uk-overexposure monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/4b776d04-1e94-4410-ba77-12ec77fd3a3a/ChatGPT+Image+Jul+15%2C+2025%2C+03_36_26+PM.png Blog - Home Bias in Asset Allocation: A Rational Case for (Some) UK Overexposure? - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/is-factor-investing-worthwhile-pursuing-practically-speaking monthly 0.5 2025-10-20 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/c15071f9-57ee-44da-a93c-a3c856687ba4/ChatGPT+Image+Jul+14%2C+2025%2C+05_53_03+PM.png Blog - Is Factor Investing Worthwhile Pursuing? Practically speaking? - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/273b0e61-fc38-4d71-ae44-f58878865644/ChatGPT+Image+Jul+14%2C+2025%2C+05_45_13+PM.png Blog - Is Factor Investing Worthwhile Pursuing? Practically speaking? - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/who-really-determines-stock-prices-the-surprising-influence-of-retail-investors monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/5486c7cb-29e8-41b5-8302-5fe68cbbc55e/ChatGPT+Image+Jul+13%2C+2025%2C+05_18_15+PM.png Blog - Who Really Determines Stock Prices? The Surprising Influence of Retail Investors - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/can-active-fund-managers-protect-the-downside monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/8e98a895-c329-49fd-88a4-8e377ee38ee9/US+2000-2002.png Blog - Can Active Fund Managers Protect the Downside? - Make it stand out Figure 1. US Active Fund Underperformance by Style (2000-2002 Bear Market). Small-cap growth: 87.5% underperformed Mid-cap value: 82.8% underperformed Large-cap value: relatively stronger, 36.5% underperformed The narrative that skilled stockpickers shine during downturns is already looking shaky. (SPIVA US Year-End 2008, p.3) https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/5a73d85d-bf98-4604-8094-3220c2c3ea38/US+Multi+Year.png Blog - Can Active Fund Managers Protect the Downside? - Make it stand out Figure 2. US Multi-Year Style Box Chart. (SPIVA US Scorecards, 2008–2022) https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/4cbd5a90-ac4c-4c2e-b9c8-d5828e75d068/Multi+Region.png Blog - Can Active Fund Managers Protect the Downside? - Make it stand out Figure 3. Global Multi-Region Chart. (SPIVA Regional Scorecards, 2008–2022) https://www.investinginevidence.co.uk/blog/can-stock-returns-be-predicted-cochrane-campbell-and-the-case-for-time-varying-discount-rates monthly 0.5 2026-03-02 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/4e9bbe21-6501-47eb-8183-f994c9486c13/output.png Blog - Can Stock Returns Be Predicted? Cochrane, Campbell, and the Case for Time-Varying Discount Rates - Make it stand out Figure 1. Dividend Yield vs Subsequent 10-Year Stock Returns This chart shows the historical relationship between dividend yields and subsequent 10-year annualised real returns for US stocks, based on data from Nobel Laureate Robert Shiller. Each dot represents a single year between 1920 and 2013. For each year, we plot: X-axis: The dividend yield at the start of the year (calculated as dividends divided by the S&P Composite Index price). Y-axis: The annualised return over the next 10 years, adjusted for inflation. The dashed line is a trend line showing the overall relationship between these two variables. What the Chart Tells Us The chart hints at a modest relationship between dividend yields and subsequent 10-year returns. The trend line slopes upwards, indicating that, on average, years with higher dividend yields have been followed by somewhat better long-term returns. When dividend yields were high (for example, above 4%), the crosses tend to appear higher on the chart, indicating stronger real returns over the following decade. When dividend yields were low (below 2%), future returns were often weaker, though with considerable variation. Whilst the pattern is far from precise, it supports the general idea that valuation matters: when investors pay less for a dollar of dividends (higher dividend yield), their future returns have historically tended to be higher, on average. This fits with research by Campbell and Cochrane, which finds that valuation ratios like the dividend yield can contain some predictive power for long-term returns, even if the signal is noisy and best used in a long-horizon context. https://www.investinginevidence.co.uk/blog/what-eugene-fama-really-says-about-efficient-markets monthly 0.5 2025-10-19 https://www.investinginevidence.co.uk/blog/growth-value-and-the-long-game-discount-rates-cash-flows-and-who-should-own-what monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/cadb3d84-12b6-463c-950c-c0b9bc595709/Cash-flow+%26+Discount-rate.png Blog - Growth, Value, and the Long Game: Discount Rates, Cash Flows, and Who Should Own What - Make it stand out Figure 2 from Campbell and Vuolteenaho (2004), showing the time-varying cash-flow and discount-rate betas of value and growth stocks. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/86ec2880-9318-4282-bc4c-9051dc659105/ChatGPT+Image+Jul+6%2C+2025%2C+05_52_01+PM.png Blog - Growth, Value, and the Long Game: Discount Rates, Cash Flows, and Who Should Own What - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/fdb68a28-a54e-4bfc-8084-6cfa0902eef7/output.png Blog - Growth, Value, and the Long Game: Discount Rates, Cash Flows, and Who Should Own What - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/passive-vs-active-fund-management-in-fixed-interest-bonds monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/fe994130-2202-4c94-a83a-ba4e154e67b1/Global+Underperformance.png Blog - Passive vs Active Fund Management in Fixed Interest (Bonds) - Make it stand out This table comes from the SPIVA Global Mid-Year 2024 Scorecard, published by S&P Dow Jones Indices. It reports the percentage of actively managed funds that underperform their respective benchmark indices, across a wide range of global asset classes, geographies, and currencies. Each row refers to a specific fund category, showing how many active funds in that category failed to beat the index over various time periods (YTD, 1-, 3-, 5-, and 10-year horizons). The higher the percentage, the worse the active managers did. For example: US General Government Bond Funds: 100% of active managers underperform over 10 years. US Large-Cap Equity Funds: 84.71% underperform the S&P 500 over 10 years. EUR High Yield Bond Funds: 73.97% underperform their benchmark over 10 years. The data are based on actual fund performance net of fees, and only include surviving funds, meaning the numbers are conservative, as they exclude those that closed down or merged due to poor performance. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/977c8233-18dd-4110-9bce-c97eb41152a8/ChatGPT+Image+Jul+5%2C+2025%2C+11_29_03+AM.png Blog - Passive vs Active Fund Management in Fixed Interest (Bonds) - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/growth-vs-value-investing monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/49dfd90f-10ab-4a22-b693-cf6ed748f2dd/Expected+Real.png Blog - Value vs Growth Investing - Make it stand out Figure 1. This shows the expected annualised real returns (net of inflation) for the next ten years (as of July 2025) for different style equity strategies. ‘DM’ denotes the term developed markets and ‘Dev ex’ denotes the term developed markets excluding the US. Data taken from Research Affiliates. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/9c573d22-5343-4760-b080-3875f5d02000/Trailing+Real.png Blog - Value vs Growth Investing - Make it stand out Figure 2. This shows the realised annualised real returns (net of inflation) for the past ten years (as of July 2025) for different style equity strategies. ‘DM’ denotes the term developed markets and ‘Dev ex’ denotes the term developed markets excluding the US. Data taken from Research Affiliates. To re-iterate, despite the theory, real-world performance fluctuates. The early 2000s favoured value investing. But from 2008 to 2020, growth stocks, especially in technology, dominated. The rise of mega-cap tech firms like Microsoft and Alphabet reshaped index performance and left value stocks trailing. https://www.investinginevidence.co.uk/blog/how-should-you-spend-in-retirement-fixed-vs-dynamic-withdrawal-strategies monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/8128d656-1474-427c-b390-85476ff0dac4/fixed_vs_dynamic_withdrawal_graph_full_grey.png Blog - How Should You Spend in Retirement? Fixed vs Dynamic Withdrawal Strategies - Make it stand out Figure 1. A comparison of hypothetical withdrawal strategies for illustrative purposes. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/5be7255a-378d-4023-9836-ffa078af7a9e/withdrawal_strategy_comparison_styled_v2.png Blog - How Should You Spend in Retirement? Fixed vs Dynamic Withdrawal Strategies - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/why-the-dcf-model-doesnt-work-for-options-and-how-black-scholes-merton-changed-everything monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/3c344eb5-b5b9-41a9-88a8-a5427b025782/BlackScholesMerton-56a6d22e3df78cf772906866.png Blog - Why the DCF Model Doesn’t Work for Options and How Black-Scholes-Merton Changed Everything - Make it stand out Credit: Khan Academy https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/dc04851b-d82f-4ed9-98a5-cf16254b6023/BSM_Model_Assumptions_Table_BoldHeader.png Blog - Why the DCF Model Doesn’t Work for Options and How Black-Scholes-Merton Changed Everything - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/rethinking-risk-and-return-the-intertemporal-capital-asset-pricing-model-icapm monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/6772adc3-2d35-4724-8649-40350f3510b4/output.png Blog - Rethinking Risk and Return: The Intertemporal Capital Asset Pricing Model (ICAPM) - Make it stand out Figure 1. This chart illustrates three core ideas from modern portfolio theory: the efficient frontier, the tangency portfolio, and the Capital Market Line (CML). The efficient frontier (the curved line) shows the best possible portfolios made up exclusively of risky assets. It represents the trade-off between risk and return before the introduction of a risk-free asset. Portfolios below the curve are inefficient, as they deliver lower returns for the same or more risk. The Capital Market Line (the dashed line) shows all the combinations of the risk-free asset and the tangency portfolio. It starts at the risk-free rate and is tangent to the efficient frontier at a single point, the tangency portfolio (the red cross). This portfolio has the highest possible Sharpe ratio, meaning it offers the best risk-adjusted return. It represents the optimal mix of risky assets. The key clarification is that once the risk-free asset is introduced, the only risky portfolio needed is the tangency portfolio. Investors don’t combine the risk-free asset with any risky portfolio, only with that one specific optimal mix. By combining the tangency portfolio with the risk-free asset, either lending (low risk) or borrowing (higher risk), investors can build any portfolio along the CML. All points on this line dominate portfolios on the efficient frontier alone, because they achieve better return for each unit of risk. https://www.investinginevidence.co.uk/blog/what-do-systematic-fund-managers-actually-believe monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/c1cb41d8-5617-4af4-8adb-594d13d722fc/systematic_managers_philosophy_uk.png Blog - What Do Systematic Fund Managers Actually Believe? - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/are-bonds-really-safer-rethinking-the-role-of-fixed-interest-in-long-term-portfolios monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/8a87d1ea-7454-4150-9f98-5db312980c86/Screenshot+2025-06-25+094443.png Blog - Are Bonds Really Safer? Rethinking the Role of Fixed Interest in Long-Term Portfolios - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/9ee0a6ae-e5c1-4f88-82c5-f75d2734a9bf/Screenshot+2025-06-25+094622.png Blog - Are Bonds Really Safer? Rethinking the Role of Fixed Interest in Long-Term Portfolios - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/0955f61e-d4b1-483c-813b-f46afe7a66b2/Screenshot+2025-06-25+093608.png Blog - Are Bonds Really Safer? Rethinking the Role of Fixed Interest in Long-Term Portfolios - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/1e557ec4-62cb-4846-ac25-4d99de4b37bd/Screenshot+2025-06-25+102702.png Blog - Are Bonds Really Safer? Rethinking the Role of Fixed Interest in Long-Term Portfolios - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/diy-investing-vs-hiring-a-financial-adviser-who-comes-out-ahead monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/cc7c6a86-ddd3-4ab9-a401-8c4e4fca9ee7/Screenshot+2025-06-22+154843.png Blog - DIY Investing vs Hiring a Financial Adviser: Who Comes Out Ahead? - Make it stand out Figure 1. Data taken from International Longevity Centre (2017). https://www.investinginevidence.co.uk/blog/wnagfova0zndvt2ypzayn8fxx4ie1y monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/2ac08e81-2dba-4c00-8fd7-e3792fe0f760/structured_products_image.png Blog - High Yields, Hidden Risks: Why Structured Products Favour the Seller - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/0c430d9d-c8ab-454b-8647-230c381096be/structured_note_outcomes.png Blog - High Yields, Hidden Risks: Why Structured Products Favour the Seller - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/13867180-997a-4913-91bd-553a02bab238/structured_product_market_outcomes_chart.png Blog - High Yields, Hidden Risks: Why Structured Products Favour the Seller - Make it stand out Figure 1. This represents the scenario presented above in chart format. https://www.investinginevidence.co.uk/blog/when-asymmetry-changes-everything-rethinking-factors-in-a-frictional-world monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/8e474213-e053-46a3-a3f3-c2b759624ce4/image.png Blog - When Asymmetry Changes Everything: Rethinking Factors in a Frictional World - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/0a07bb82-6d15-4b99-9eb2-f9095c093cce/Screenshot+2025-06-18+205509.png Blog - When Asymmetry Changes Everything: Rethinking Factors in a Frictional World - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/discretionary-active-fund-managers-or-crystal-ball-psychics monthly 0.5 2025-06-20 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/1d0a973b-94ef-4651-b695-17f7928c06ab/ChatGPT+Image+Jun+20%2C+2025%2C+10_26_30+AM.png Blog - Discretionary Active Fund Managers or Crystal Ball Psychics? - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/ec4d83sp6ctju9ol5o7x2nwnzrm58u monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/db3704cb-b15a-4e8f-a2ae-02b1c6f55704/output.png Blog - Understanding Derivatives: Risks and Rewards - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/e1d14dac-340a-4bbb-9bfe-66215c02e3b5/Call_Option_Profit_Profiles.png Blog - Understanding Derivatives: Risks and Rewards - Make it stand out Figure 1. Long and short European call options with a $200 strike and $10 premium. Profit for both profiles factors in the option premium paid/ received. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/20882d82-63e3-4dc2-97f4-ae2b04c4ec85/Put_Option_Profit_Profiles.png Blog - Understanding Derivatives: Risks and Rewards - Make it stand out Figure 2. Long and short European put options with a $140 strike and $14 premium. Profit for both profiles factors in the option premium paid/ received. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/df22dd12-f336-4d79-a901-68d325d49969/77a2a638-a96f-4286-87d8-45294bb640b2.png Blog - Understanding Derivatives: Risks and Rewards - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/nfeix5sjfdldbs2y4gexofzyxst6zq monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/176522ba-ad7b-4edd-97ff-1def1b20dabd/darker_strengths_table.png Blog - The Foundations of Modern Investing: Why Markowitz and the CAPM Still Matter - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/c08b6fb8-c733-4684-8eef-30c6e5f02fdc/darker_limitations_table.png Blog - The Foundations of Modern Investing: Why Markowitz and the CAPM Still Matter - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/ymdk7jr8qfmygvwkgeapfmw73q02zh monthly 0.5 2026-01-04 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/ba76aa41-9f30-490b-958e-835754204baf/dfus_vs_vti_5yr_growth_cleaned_and_grey.png Blog - Smarter Indexing, Better Results: 10 Reasons to Consider Dimensional and Avantis - Make it stand out Figure 1. This chart compares the growth of a $10,000 investment in Dimensional U.S. Equity Market ETF (DFUS) and Vanguard Total Stock Market ETF (VTI) over a 5-year period. DFUS ends with a total return of +34.5%, whilst VTI trails slightly at +29.6%. Both funds provide broad exposure to the US equity market, but DFUS applies slight tilts towards smaller and more profitable companies, along with flexible trading strategies to reduce hidden costs. This outperformance highlights how strategic portfolio design can enhance returns over time, even when tracking similar market segments. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/29f54c7d-0bbc-4d6b-a142-2f105fd8c4d7/DFA_Avantis_vs_Vanguard_Comparison_Final.png Blog - Smarter Indexing, Better Results: 10 Reasons to Consider Dimensional and Avantis - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/beyond-the-three-factor-model-how-rafi-and-novy-marx-enhanced-our-understanding-of-asset-pricing monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/90f59c8f-e2a5-4655-ac56-9265feba0e48/ChatGPT+Image+Jun+7%2C+2025%2C+03_13_44+PM.png Blog - Beyond the Three-Factor Model: RAFI, Profitability and the Evolution of Smart Beta - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/760f1c75-9839-4e51-a276-f717b9239909/how_rafi_differs_from_fama-french_5-factor_model_headergrey+2.png Blog - Beyond the Three-Factor Model: RAFI, Profitability and the Evolution of Smart Beta - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/8b504b6a-61b4-429d-85c3-bdde09bb0760/novy-marxs_core_insights_headergrey.png Blog - Beyond the Three-Factor Model: RAFI, Profitability and the Evolution of Smart Beta - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/630ed4b6-2a16-412e-8ac4-5c7d8029b4ca/novy-marx_vs_rafi_headergrey+2.png Blog - Beyond the Three-Factor Model: RAFI, Profitability and the Evolution of Smart Beta - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/37b092a0-ddf7-4abf-b7fb-fb263bcd8b07/ChatGPT+Image+Jun+7%2C+2025%2C+03_15_44+PM.png Blog - Beyond the Three-Factor Model: RAFI, Profitability and the Evolution of Smart Beta - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/98a97408-d9da-4ea7-a0da-40be856d0f17/factor_momentum_vs_stock_momentum_headergrey.png Blog - Beyond the Three-Factor Model: RAFI, Profitability and the Evolution of Smart Beta - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/property-or-investment-portfolio-a-deep-dive-into-uk-buy-to-let-vs-stocks-and-bonds monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/28a15e01-8bad-4420-bcf7-a7efa28722cf/scenario_comparison_v2.png Blog - Property or Investment Portfolio? A Deep Dive into UK Buy-to-Let vs Stocks and Bonds - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/c194f60f-0b19-4110-a3af-f2dacf9e6a8d/compounding_growth_v2.png Blog - Property or Investment Portfolio? A Deep Dive into UK Buy-to-Let vs Stocks and Bonds - Make it stand out Source: author calculations. Assumes real returns and full reinvestment. https://www.investinginevidence.co.uk/blog/etytbv6xo75f2e52xkv4pi16jwxztu monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/eca332b8-2c5e-4c33-9faa-dd2a54b46481/ChatGPT+Image+Jun+1%2C+2025%2C+06_47_15+PM.png Blog - The ESG & Ethical Trade-off: Lower Returns for a Cleaner Conscience? - This implies a fundamental trade-off: the more you align your portfolio with ethical or ESG preferences, the more you may sacrifice long-run returns (Pastor, Stambaugh, and Taylor 2021). https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/61699444-beab-4f71-9d35-1bfcfbe4027e/GIF+Image+1.png Blog - The ESG & Ethical Trade-off: Lower Returns for a Cleaner Conscience? - Asness (2017) frames the debate as one of virtue versus impact: are you trying to feel virtuous, or are you trying to maximise utility for society? https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/955145bc-824b-4124-b6df-c40896e25fcf/f200794d-41c9-478b-866d-845f953ba70d.png Blog - The ESG & Ethical Trade-off: Lower Returns for a Cleaner Conscience? - This branding arbitrage raises questions about how much of ESG fund performance is attributable to genuine ESG insights versus momentum from investor demand. https://www.investinginevidence.co.uk/blog/when-the-essentials-became-a-luxury-the-rise-of-intergenerational-inequality monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/2352dd83-5f33-4d23-8d26-71b9ba009605/UK+University+Tuition+Fees+Adjusted+for+Inflation+%281950%E2%80%932023%29.png Blog - When the Essentials Became a Luxury: The Rise of Intergenerational Inequality - Make it stand out Figure 1. The chart above tracks UK university tuition fees from 1950 to 2023, adjusted for inflation into 2023 pounds. It tells a striking story of how access to higher education has evolved from a publicly funded right to a significant personal financial commitment. 1950 to the late 1990s: Tuition was entirely free. For decades, the idea of charging students was politically unthinkable, education was seen as a public good, funded by the state. 1998: A turning point. Tuition fees of £1,000 per year were introduced under the Labour government. In real terms, this marked the first meaningful financial burden placed on students. 2004 and 2010: Fees were raised to £3,000, then to £3,225, continuing the trend of shifting costs from the public to the individual. 2012: The most dramatic change occurred, the cap was lifted to £9,000, and later to £9,250, where it remains today. In inflation-adjusted terms, this represents a fivefold increase in just over two decades. Students are paying more than ever before in real terms, despite often facing stagnant graduate wages, higher housing costs, and increased living expenses. Whilst university remains a valuable investment for many, the burden of funding it has clearly shifted across generations—adding yet another layer to the growing intergenerational inequality landscape. Please see the ‘Chart References’ section at the bottom of this blog post for further information. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/b2eee8be-58c6-4673-95bb-d05713f15d31/Real+House+Prices+vs+Real+Wages+%28Index%3A+197 Blog - When the Essentials Became a Luxury: The Rise of Intergenerational Inequality - Make it stand out Figure 2. This chart compares the inflation-adjusted trajectory of real house prices and real wages in the UK, with both indexed to 1970 = 100. Real house prices have risen by around 350% or more than 4.5× in real terms since 1970. In contrast, real wages have only increased by around 70% over the same period. The increased divergence begins around the mid-1990s, accelerating post-2000—driven by factors such as: Loose credit and low interest rates. A surge in buy-to-let investment. Planning restrictions and supply shortages. Global capital inflows into UK housing. This growing gap between earnings and housing costs highlights how homeownership has become increasingly unattainable, particularly for younger and lower-income households. Please see the ‘Chart References’ section at the bottom of this blog post for further information. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/6b674ba7-de99-4261-b665-2a142cc97ba8/UK+House+Price-to-Income+Ratio+%281950%E2%80%932025%29.png Blog - When the Essentials Became a Luxury: The Rise of Intergenerational Inequality - Make it stand out Figure 3. This chart tracks the ratio of average house prices to average incomes in the UK from 1950 to 2025. In the 1950s and 60s, house prices were around 3× average annual income. By 2020, this ratio had climbed to over 12× in some regions, with a national average between 8× and 12×. The steepest rises occurred between 1997 and 2007, coinciding with deregulation of mortgage markets and a major credit expansion. This ratio is a core indicator of housing affordability, and its rise illustrates the growing disconnect between what people earn and what housing costs—a structural shift with serious intergenerational implications. Please see the ‘Chart References’ section at the bottom of this blog post for further information. https://www.investinginevidence.co.uk/blog/should-you-hedge-currency-risk-in-your-portfolio monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/763964e4-f993-4dd0-963d-14210ba62271/Asset+Classes.png Blog - Should You Hedge Currency Risk in Your Portfolio? - Make it stand out Figure 1. The chart compares the approximate annualised volatility of four asset classes: global equities, currency markets, hedged bonds, and unhedged bonds. These figures are illustrative and rounded for clarity: Chart Summary and Assumptions Equities: ~15% annualised volatility, based on historical global equity data (MSCI World Index). Currencies: ~8% annualised volatility. Currency pairs like GBP/USD or EUR/USD exhibit significant variability but typically less than equities (Ilmanen 2011). Hedged Bonds: ~3% annualised volatility, representing the typical behaviour of GBP-hedged high-quality global bond funds (Vanguard 2023). Unhedged Bonds: ~10% annualised volatility due to combined interest rate, credit, and currency risk (Vanguard 2020). Further Assumptions and Rationale Equity and bond volatilities are based on long-term historical averages across global diversified indices. Currency volatility is derived from major developed-market currency pair data. Volatility for unhedged bonds includes an uplift from foreign exchange (FX) risk. Hedged bond volatility assumes currency risk is neutralised using forward contracts or similar instruments. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/0477b33c-4335-4520-8e2f-8a484cc3ee52/IMG_0299+%281%29.jpg Blog - Should You Hedge Currency Risk in Your Portfolio? - Make it stand out Figure 2. The chart above illustrates the importance of currency hedging in the context of global government bond investing for sterling-based investors. It compares the cumulative performance of two versions of the FTSE World Government Bond Index – Developed Countries: one hedged to GBP and the other unhedged, alongside a composite FX blend (USD/JPY/EUR vs GBP). Source: Banker on Wheels (2020). What the Chart Shows Maroon Line (Top): This represents the performance of GBP-hedged global bonds. The line is smooth and upward-sloping, reflecting steady returns and low volatility, exactly what you’d expect from a defensive asset class. The impact of foreign exchange is removed, leaving only interest rate and credit risk. Pink Line (Middle): This line tracks unhedged global bonds. The same underlying bonds are held, but now the returns are influenced by currency movements. As a result, the line is bumpier and more volatile. At times, currency swings enhance returns; at other times, they detract from them. Grey Line (Fluctuating): This is a composite FX blend that captures the relative strength of major foreign currencies (USD, JPY, EUR) against the British pound. It exhibits sharp fluctuations, particularly during periods of financial crisis or geopolitical instability (e.g. the 2008 financial crisis or Brexit-related volatility). Key Takeaways Currency Volatility Adds Noise to Bond Returns The unhedged bond index mirrors many of the swings seen in the FX blend, confirming that currency exposure adds equity-like volatility to what should be a stabilising asset class. Hedging Helps Preserve Bonds’ Defensive Role The hedged bond index maintains a smoother upward trajectory, better fulfilling its purpose as the low-risk ballast of a diversified portfolio. FX Movements Are Unpredictable The grey FX line underscores the unpredictability of currency markets. Over shorter horizons, FX moves can dominate bond returns—but over the long run, the average contribution of currency exposure tends to net out, whilst the volatility remains. The Bottom Line For UK investors, currency exposure in global bonds is generally not rewarded. There is no reliable long-term premium for taking it on, and the added volatility weakens the portfolio's overall structure. Hedging global bonds back to GBP helps ensure that fixed income plays its intended role: stability, not speculation. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/22de2d21-b0f4-4174-94a1-847e420ebc50/Screenshot+2025-09-30+202151.png Blog - Should You Hedge Currency Risk in Your Portfolio? - Figure 3. Dimensional Scatter Plot of Annual Currency Returns: Next Year vs This Year. Figure 3. Dimensional Scatter Plot of Annual Currency Returns. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/44db73ea-4798-440b-8c26-5a14a02a2b0c/Screenshot+2025-09-30+203939.png Blog - Should You Hedge Currency Risk in Your Portfolio? The regression slope is small (near zero), the t-statistics are weak, and the R2R^2R2 is close to zero. dimensional.com In other words, extrapolating currency trends (e.g. “the AUD went up last year, so it’ll keep going up”) is generally a bad idea given historical evidence. This undermines attempts to time currency hedging (i.e. choosing when to hedge or unhedge based on recent currency performance) because the currency swings are largely unpredictable from one year to the next. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/72abaebb-c81c-433f-99d2-0e9e3cd2f9df/Screenshot+2025-09-30+204445.png Blog - Should You Hedge Currency Risk in Your Portfolio? Average monthly returns are almost identical across all hedging levels (0.96%–0.98%). The differences are tiny (0.01%–0.02%) and not statistically significant (t-stats well below 2). In other words, hedging did not materially increase or decrease returns. Annualised standard deviation falls modestly when portfolios are partially hedged (lowest at 50% hedge, 13.15% vs 13.85% unhedged), but rises again if you go to a fully hedged position (14.42%). https://www.investinginevidence.co.uk/blog/strategic-and-tactical-asset-allocation-a-recipe-for-underperformance monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/b3089b6a-e196-449d-a1f9-2fe2c3c5e668/output.png Blog - Strategic and Tactical Asset Allocation: A Recipe for Underperformance - Make it stand out Figure 1. The chart compares the cumulative returns of four portfolio strategies, Market Cap Weighted 100% stock portfolio, Factor Investing (100% stocks), Strategic Asset Allocation (SAA - 100% stocks), and Tactical Asset Allocation (TAA - 100% stocks), over a 50-year period. To ensure a realistic representation, the results are averaged across 100 simulations to reduce random fluctuations that can distort outcomes. One of the key takeaways here is that Factor Investing shows the highest cumulative returns over the long term. This aligns with academic evidence suggesting that systematic factor tilts (like value, size, or momentum) tend to deliver superior performance over extended periods despite higher short-term volatility. In contrast, both SAA and TAA, despite being fully allocated to equities, tend to underperform due to their inherent lack of systematic exposure to proven risk premia. Market Cap Weighted portfolios also perform consistently well, as they are broadly diversified and free from the pitfalls of discretionary adjustments typical of SAA and TAA. This chart reinforces the idea that deviating from a market-cap approach without systematic, evidence-backed rationale often results in lower returns, particularly when strategies like SAA and TAA are based on predicting market movements rather than capturing persistent factor risk premia. Please see the ‘Methodology’ and ‘Chart References’ section at the bottom of this blog post for further information. https://www.investinginevidence.co.uk/blog/cryptocurrency-as-an-investment-a-speculative-gamble monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/7d3a5385-8bd9-41ed-be92-65bb17a22e20/ChatGPT+Image+May+17%2C+2025%2C+03_17_42+PM.png Blog - Cryptocurrency as an Investment: A Speculative Gamble - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/dae01d9a-ce53-401b-bcb3-642844976f69/output.png Blog - Cryptocurrency as an Investment: A Speculative Gamble - Make it stand out Figure 1. This displays the periods in time where the index was down compared to a previously achieved peak. The longest drawdown period lasted for 3 years and 1 month and was between November 2013 and December 2016. It reached a trough of -76.7%. The deepest drawdown period lasted for 3 years and 1 month and was between November 2013 and December 2016. It reached a trough of -76.7%. Data taken from Curvo 2025. https://www.investinginevidence.co.uk/blog/why-stock-and-fund-picking-is-detrimental-to-end-client-outcomes monthly 0.5 2025-06-17 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/674ada4e-353d-451b-850d-5f90755ba821/ChatGPT+Image+May+10%2C+2025%2C+08_15_54+PM.png Blog - Why Stock and Fund Picking Is Detrimental to End-Client Outcomes - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/is-day-trading-stocks-a-viable-strategy monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/97210142-7a5c-416e-b0d4-4e6e2e1f5e53/Profitability+of+Day+Traders%3A+US+vs+UK+vs+Taiwan+%28Before+and+After+Costs%29.png Blog - Is Day Trading Stocks a Viable Strategy? - Make it stand out Figure 1. The chart compares the profitability of day traders in the US, UK, and Taiwan before and after costs. Data for the US come from Barber et al. (2014), which found that around 20% of day traders were profitable before costs, but fewer than 1% remained profitable after costs. The UK data, estimated from FCA (2021) findings, show that about 18% of day traders are profitable before costs, dropping to just 2% after costs. The Taiwan data, from Barber et al. (2005), reveal that 40% of traders achieved gross profits before costs, but only 15% remained profitable after accounting for trading expenses. The chart highlights the stark difference between initial profitability and the impact of trading costs on sustained success. https://www.investinginevidence.co.uk/blog/why-picking-individual-stocks-is-not-a-good-idea monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/e9be29d0-16e0-45b0-9c00-34f4f774bc8e/Diversification_cleaned_and_grey.png Blog - Why Picking Individual Stocks Is Not a Good Idea - Make it stand out Figure 1. Portfolio risk reduces significantly up to around 30–50 stocks, after which the benefits of diversification diminish rapidly. Data adapted from Evans and Archer (1968). https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/cedc828c-11bc-4856-9800-7d9b9a655ad0/ChatGPT+Image+May+5%2C+2025%2C+09_57_39+AM.png Blog - Why Picking Individual Stocks Is Not a Good Idea - Make it stand out Figure 2. The chart visualises global stock return outcomes, based on data from Bessembinder et al. (2020). It reveals the extreme skew in stock market performance: The vast majority of individual stocks, shown under the large curve, underperformed U.S. Treasury bills or were complete failures. Only 1.3% of global stocks (represented by the small orange bar on the far right) were responsible for all the net wealth creation in global equity markets over the 1990–2018 period. The odds of selecting one of the rare winners are extremely low. Diversification is not just helpful, it’s essential to capture the upside of these few value-creating stocks while protecting against the downside of the many that disappoint. https://www.investinginevidence.co.uk/blog/passive-in-name-only-why-passive-funds-might-not-be-so-passive-after-all monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/0d2f245c-e2e2-4b73-9da4-d4db3d8c4fd5/ChatGPT+Image+May+4%2C+2025%2C+05_45_35+PM.png Blog - Passive in Name Only? Why ‘Passive’ Funds Might Not Be So Passive After All - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/how-often-should-you-rebalance-your-portfolio monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/3034819f-9570-46d7-861d-7f64846f55c2/unrebalanced_vs_rebalanced_sp500_1957_2024.png Blog - How Often Should You Rebalance Your Portfolio? - Make it stand out Figure 1. The chart illustrates the hypothetical growth of $1 invested in the S&P 500 from 1957 to 2024 under two scenarios: one in which the portfolio is rebalanced periodically (as in the real S&P 500), and another in which the original 500 stocks are held without any rebalancing or replacements. The unrebalanced portfolio significantly outperforms over the long term due to the compounding effect of a small number of dominant winners. This supports findings by Jeremy Siegel and Jeremy Schwartz that rebalancing can, in some cases, reduce long-term returns by trimming exposure to top performers. Adapted from: Siegel, Jeremy J., and Jeremy D. Schwartz. 2006. ‘The Long-Term Returns on the Original S&P 500 Firms’. Financial Analysts Journal 62 (1): 18–31. https://www.investinginevidence.co.uk/blog/the-hidden-costs-of-indexing-what-investors-should-understand monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/225a2552-a257-4ee0-879f-160bae3e0a00/tesla_sp500_inclusion_cleaned_and_grey.png Blog - The Hidden Costs of Indexing: What Investors Should Understand - Make it stand out Figure 1. This chart shows the movement of Tesla’s stock price from November 2020 to January 2021, centred around its announcement and official inclusion into the S&P 500 index. The red dashed line marks November 16, 2020, when it was publicly announced Tesla would join the index. The green dashed line marks December 21, 2020, when Tesla was officially added. Following the announcement, Tesla’s stock price surged sharply, illustrating how forced buying by index funds (and front-running by traders) inflated Tesla’s valuation ahead of inclusion. After the inclusion date, the stock's momentum stalled, highlighting the hidden costs passive investors often face during major index rebalances. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/98255457-4e69-4a07-a32a-167f81d6c00e/dfus_vs_vti_5yr_growth_cleaned_and_grey.png Blog - The Hidden Costs of Indexing: What Investors Should Understand - Make it stand out Figure 2. This chart compares the growth of a $10,000 investment in Dimensional U.S. Equity Market ETF (DFUS) and Vanguard Total Stock Market ETF (VTI) over a 5-year period. DFUS ends with a total return of +34.5%, while VTI trails slightly at +29.6%. Both funds provide broad exposure to the U.S. equity market, but DFUS applies slight tilts toward smaller and more profitable companies, along with flexible trading strategies to reduce hidden costs. This outperformance highlights how strategic portfolio design can enhance returns over time, even when tracking similar market segments. https://www.investinginevidence.co.uk/blog/does-owning-lots-of-funds-actually-improve-diversification monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/f1608bc6-2de4-47b7-a1e7-801e6902ca8e/Diversification_cleaned_and_grey.png Blog - Does Owning Lots of Funds Actually Improve Diversification? - Make it stand out Figure 1. Portfolio risk reduces significantly up to around 30–50 stocks, after which the benefits of diversification diminish rapidly. Data adapted from Evans and Archer (1968). https://www.investinginevidence.co.uk/blog/understanding-convertible-bonds-a-hybrid-between-debt-and-equity monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/c50d1fe7-9e2b-410a-851f-bdf87c5c115d/Convertible+Bonds.png Blog - Understanding Convertible Bonds: A Hybrid Between Debt and Equity - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/why-stocks-belong-in-every-investors-portfolio monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/115dafd1-16d1-4af3-90da-64d7943671f6/Purchasing+Power_cleaned_and_grey.png Blog - Why Stocks Belong in Every Investor’s Portfolio - Make it stand out Figure 1. Historical data adapted from Siegel (2022). The graphic illustrates long-term return estimates and how different assets have either gained or lost purchasing power since 1802. https://www.investinginevidence.co.uk/blog/understanding-the-different-types-of-bonds-in-the-uk monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/a39c43d6-32b9-4700-aca3-813d3cc2e354/Bonds.png Blog - Understanding the Different Types of Bonds in the UK - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/a69a493a-993e-499e-b15b-4dfafda2e53e/Behaviour.png Blog - Understanding the Different Types of Bonds in the UK - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/the-basics-of-investing-a-beginners-guide-for-uk-investors monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/a88ce0b4-7d8c-427d-b89d-15f67f9e9e50/Generic+Rectangle.png Blog - The Basics of Investing: A Beginner’s Guide for UK Investors - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/d5ad68a8-d990-4cbd-aafa-8fb09310a359/Diversification.png Blog - The Basics of Investing: A Beginner’s Guide for UK Investors - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/can-active-fund-managers-consistently-outperform-the-market-part-one monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/054b9f34-36ad-4946-a2f9-f3b00b5aca95/Efficient+Markets.png Blog - Can Active Fund Managers Consistently Outperform the Market? (Part One) - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/2b296b58-09b6-4954-82de-949bdf7d09df/Skewness.png Blog - Can Active Fund Managers Consistently Outperform the Market? (Part One) - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/can-active-fund-managers-consistently-outperform-the-market-part-two monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/968a750b-9dbc-4320-b7a0-1bcbd25e0326/baillie_gifford_vs_benchmark_chart_grey_bg.png Blog - Can Active Fund Managers Consistently Outperform the Market? (Part Two) - Make it stand out Figure 1. Baillie Gifford American Fund Annual Returns vs. Benchmark (2015–2024). Data from Morningstar. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/1aec7ef3-a86d-4b7f-9c5b-13546137554a/active_funds_underperformance_chart_nogrid_centered.png Blog - Can Active Fund Managers Consistently Outperform the Market? (Part Two) - Make it stand out Figure 2. Percentage of actively managed funds underperforming their benchmarks over a 20-year period across key regions. Data from SPIVA Year-End 2023 Scorecards. https://www.investinginevidence.co.uk/blog/the-irrelevance-of-dividend-investing monthly 0.5 2025-10-19 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/acecb96d-73e3-4503-ada1-393ebf2046ed/Dividends.png Blog - The Irrelevance of Dividend Investing - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://www.investinginevidence.co.uk/blog/factor-investing-an-evidence-based-approach-to-outperformance monthly 0.5 2025-11-23 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/fa6623c3-58ed-404c-8139-fccb686f8f45/Factor+Investing.png Blog - Factor Investing in Equities: An Evidence-Based Approach to Outperformance - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/3843af4d-5841-49bf-bd57-683ba88a4179/image.png Blog - Factor Investing in Equities: An Evidence-Based Approach to Outperformance - Make it stand out Whatever it is, the way you tell your story online can make all the difference. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/a12b7964-747b-44ec-9c4b-0a64b0f87d80/Fama-French+Value+Premium+%28HML%29%2C+2000%E2%80%932007.png Blog - Factor Investing in Equities: An Evidence-Based Approach to Outperformance - Make it stand out Figure 1. The chart displays the annual excess return of value stocks over growth stocks, known as the value premium or HML (High Minus Low), from 2000 to 2007. This was a period during which value stocks decisively outperformed growth stocks. This outperformance followed the burst of the dot-com bubble, as capital rotated away from highly priced tech and growth names into more attractively valued, fundamentally sound companies—many of which fell into the value category. Over this eight-year stretch, and aside from 2007, the value premium was consistently positive, reflecting one of the most favourable environments for value strategies in recent decades. The cumulative return of the value premium during this period was approximately +106.6%, with a compound annual growth rate (CAGR) of 9.5%. Pretty sweet if you ask me. In contrast, the market premium, defined as the return of the US market over the risk-free rate, had a negative cumulative return of −8.45% and a CAGR of −1.10% over the same period. This stark underperformance reflects the damage caused by the dot-com bust (2000–2002), which disproportionately impacted growth stocks and weighed heavily on the overall market. The market used in this analysis is the US equity market, as defined by the Fama-French ‘Market’ factor, which includes all eligible NYSE, AMEX, and NASDAQ stocks in a value-weighted portfolio (essentially market-cap weighted). Please see the ‘Chart References’ section at the bottom of this blog post for further information. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/8444d940-29b7-462b-9b5c-65c0151e5d32/us_factor_persistence_table_darker_header.png Blog - Factor Investing in Equities: An Evidence-Based Approach to Outperformance - Make it stand out Persistence of US Academic Factor Premia. See Felix (2020). https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/1ee8b005-4f91-4fa4-bc00-afc82e57e5d0/ex_us_factor_persistence_table_darker_header.png Blog - Factor Investing in Equities: An Evidence-Based Approach to Outperformance - Make it stand out Persistence of ex-US Academic Factor Premia. See Felix (2020). https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/0267ae35-0310-4e4c-99b8-c14d06508792/Annualised+Returns%3A+Market%2C+Value%2C+Size%2C+Momentum+%281973%E2%80%932024%29.png Blog - Factor Investing in Equities: An Evidence-Based Approach to Outperformance - Make it stand out Figure 2. The chart displays annualised returns from 1973 to 2024 for four prominent equity factors: Market, Value, Size, and Momentum. The data have been simulated to reflect realistic patterns based on long-term academic findings. Each factor exhibits cyclical performance, often behaving differently across market regimes. This visual underscores the rationale for multi-factor diversification rather than attempting to time individual factor performance. Market represents the equity risk premium. Value reflects the excess returns of cheap stocks (based on price-to-book or similar metrics) over expensive ones. Size captures the historical premium of small-cap stocks over large-cap stocks. Momentum measures the tendency for stocks with recent positive performance to continue outperforming in the short term. Please see the ‘Chart References’ section at the bottom of this blog post for further information. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/d4927591-1da6-4808-8f5c-1e30f1e2d03c/Matplotlib+Chart.png Blog - Factor Investing in Equities: An Evidence-Based Approach to Outperformance - Make it stand out Here are the historical cumulative returns and CAGR from 1973 to 2024 based on Fama-French data. These results strongly support the case for long-term factor investing. Whilst there is substantial year-to-year variation, over five decades both the market and factors like momentum and value have delivered meaningful long-term excess returns. The path was volatile, but the reward has historically been there for those with the patience and conviction to stay the course. The cumulative returns and CAGRs reported above represent the return spread between long and short portfolios, not the total return of a long-only factor fund. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/ea1cb425-826e-4744-9de0-3712e5bb8926/Growth+of+%241%3A+Market+vs+Market+%2B+Value+Tilt+%281973%E2%80%932024%29.png Blog - Factor Investing in Equities: An Evidence-Based Approach to Outperformance - Make it stand out Figure 3. The chart shows the compound growth of $1 invested from 1973 to 2024 in two portfolios—one tracking the US market and the other with a 20% tilt towards value stocks. Although the performance paths are nearly identical, the value-tilted portfolio ultimately lags slightly behind. This reflects the challenging period for value investing over the past 15 years, despite its historically positive premium. Whilst the market portfolio (Mkt–RF) delivered the highest cumulative return over the full period, it’s important to recognise that it holds a significant allocation to growth stocks, which have historically underperformed value stocks in many long-term time periods. The value premium (HML) reflects the excess return of value over growth, and by tilting away from the market and towards value, investors can potentially enhance their long-term, risk-adjusted returns. Although muted in the recent decade and a half, the underlying rationale remains: by tilting away from growth and towards value, investors aim to improve long-term, risk-adjusted returns—not necessarily in every time period, but across many time periods. This doesn’t mean abandoning the market—it means refining it systematically. A modest 20% tilt towards value, as illustrated in the chart, keeps broad diversification intact whilst positioning the portfolio to benefit when the value premium reasserts itself. And whilst value is used here as an example, similar tilts towards other empirically validated factors, like momentum, quality, or profitability, can also enhance portfolio efficiency over time. Please see the ‘Chart References’ section at the bottom of this blog post for further information. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/5106593c-f0f4-43ae-bc37-e0afd0ab6f93/Fama-French+Value+Premium+%28HML%29%2C+2008%E2%80%932022.png Blog - Factor Investing in Equities: An Evidence-Based Approach to Outperformance - Make it stand out Figure 4. The chart displays the annual excess return of value stocks over growth stocks, known as the value premium or HML (High Minus Low), from 2008 to 2022. This 15-year period was particularly challenging for value investing. The 2010s were dominated by growth stocks, as investors gravitated towards capital-light, high-growth businesses in a low-rate, tech-led market. Years such as 2008, 2011, 2014, 2015, 2019, and 2020 saw value significantly underperform growth, leading to persistent negative value premia. A sharp reversal began in 2021, with the value premium rising to +22.2%, followed by an even stronger +31.7% in 2022, as inflation, interest rate hikes, and macroeconomic uncertainty triggered a rotation back into value-heavy sectors like energy, financials, and industrials. Despite this late-cycle rebound, the cumulative return of the value premium over the full period was approximately −15.6%, with a compound annual growth rate (CAGR) of −1.13%. This stretch stands as a clear reminder that even well-documented return premia can face long, difficult cycles, making conviction and patience essential. Such cyclical behaviour reinforces the importance of factor diversification and a disciplined, evidence-based approach, rather than relying on any single style or regime to deliver consistent outperformance. Please see the ‘Chart References’ section at the bottom of this blog post for further information. https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/4d486122-68b4-4472-8a2b-12a9afe3fff7/Fama-French+Momentum+Premium+%28UMD%29%2C+2008%E2%80%932022.png Blog - Factor Investing in Equities: An Evidence-Based Approach to Outperformance - Make it stand out Figure 5. The chart above shows the Fama-French Momentum Premium UMD (Up Minus Down) from 2008 to 2022, representing the annual excess return of past winning stocks over past losers. Momentum investing, which involves going long on recent outperformers and short on underperformers, has historically delivered a positive premium, but its journey over this period was anything but smooth. From 2008 to 2022 momentum delivered: Cumulative return: −15.97% Compound annual growth rate (CAGR): −1.15% This confirms that, like value, momentum also experienced a difficult 15-year stretch and reinforces an important lesson for evidence-based investors: factor strategies require discipline, and chasing performance or abandoning a factor after underperformance can be costly. Momentum remains a valuable component of a diversified factor portfolio, but only when held with conviction and patience. Please see the ‘Chart References’ section at the bottom of this blog post for further information. https://www.investinginevidence.co.uk/blog/category/Economics monthly 0.5 https://www.investinginevidence.co.uk/blog/category/Retirement+Planning monthly 0.5 https://www.investinginevidence.co.uk/blog/category/Opinion monthly 0.5 https://www.investinginevidence.co.uk/blog/category/Investing monthly 0.5 https://www.investinginevidence.co.uk/blog/category/Practical+Investing monthly 0.5 https://www.investinginevidence.co.uk/blog/category/Investment+Theory monthly 0.5 https://www.investinginevidence.co.uk/home daily 1.0 2025-10-20 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/e4cd92a9-0355-429b-96a5-5a6a9ee505ea/image.png https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/2ed6c902-a449-459c-9479-7e0c64913a7d/Bull+and+Bear.png https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/2688029c-e54e-40ff-aac3-c8f7d4400ee2/Suit.png https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/1927a43b-452c-4fd6-a834-a07bc108844f/Money+2.png https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/7171cb2d-4af9-461b-8be0-ef34f4cbfeeb/Science.png https://www.investinginevidence.co.uk/about daily 0.75 2026-03-01 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/30605e10-90b3-4eba-a417-6cd3a7597eff/IMG_1649.JPG https://www.investinginevidence.co.uk/disclaimer daily 0.75 2026-02-03 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/1753200258317-UL3TFA7SJJAZ9LYU27RE/unsplash-image-pCHl_wqfr0M.jpg https://www.investinginevidence.co.uk/financial-tools daily 0.75 2025-11-05 https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/9abe30eb-dbd1-4030-86f7-983103aacfa4/Excel+Colour.png https://images.squarespace-cdn.com/content/v1/67f2df32b3dddf176b77c7f1/5f16518f-95d2-45d9-b6b5-8510613f22af/ChatGPT+Image+Sep+15%2C+2025%2C+09_32_35+PM.png https://www.investinginevidence.co.uk/reading-list daily 0.75 2026-02-04 https://www.investinginevidence.co.uk/glossary daily 0.75 2026-03-05