Updated May 2025
INDEX FOR EVANSON ASSET MANAGEMENT WEBSITE
Articles on EAM's website explain EAM's approach to asset management as well as well as portfolio design and many other investment topics and were written by Steven Evanson, Ph.D., All aim to provide brief but in depth information on EAM's services and various investment issues.
FEES AND SERVICES: This article covers our fixed management fees, our preference for passive and index strategy, our current assets under management, our prompt full service philosophy, our quarterly reporting, and how to become a client.
FREQUENTLY ASKED QUESTIONS: This section supplements "Fees and Services" and addresses a long list of frequently asked questions regarding EAM's structure and operations, our investment strategy, account safety, firm succession plans and many other issues.
ACTIVE AND PASSIVE INVESTMENT STRATEGY COMPARISON: This article defines active, passive, and index investing, the unpredictability of markets, economies, and securities prices, the relationship of risk to return, why active management is more risky and expensive than passive management, and presents research showing the consistent underperformance of active strategies and the unpredictability of active manager returns.
DIMENSIONAL FUND ADVISORS (DFA) AND EAM: This article presents the history and philosophy of DFA and EAM. EAM and DFA are independent yet share similar investment policies and perspectives.
ARE DFA STRATEGIES SUPERIOR?: Since 2013 numerous mutual funds have been introduced with fund names similar or identical to DFA's asset class funds and with various alleged factor tilts. This article compares the strategies, composition, expense ratios, and returns from DFA's funds to factor tilted and index funds now offered by major brokerage firms.
EFFECT OF ADVISORY FEES ON PORTFOLIO PERFORMANCE: This article examines the costs of investing and the lack of disclosure and obfuscations of the financial industry regarding the risks and costs of investing. We present data showing the effect of advisory fees on investor returns during a 30-year accumulation period and a 30-year distribution period. Probabilities and risks in distributions during retirement are also discussed.
INVESTMENT RISK: This article presents ten different categories of investment risk that may cause a decline in portfolio value or complete loss of principal. These include panics and crashes, bond defaults, bank failures, currency risk, liquidity risk, macroeconomic risk, fraud and corruption, political risk, catastrophe risk, and cyber-risk.
INVESTOR RETURNS VERSUS INVESTMENT RETURNS: Investors receive returns based on their real portfolio holdings and the time periods they have held them, not returns in a optimistic time sample or one or a few asset classes. Investor returns significantly lag asset class and index returns over time. This article examines why this occurs and the range of underperformance found in the few studies examining the returns real investors receive.
RISK AND RETURN: This article examines the relationship between risks and returns, standard deviation as a measure of risk and the benefits of broad diversification. It presents cautionary notes on past data and how to estimate worst case portfolio declines.
PORTFOLIO DESIGN: This article presents strategies and considerations for portfolio design and asset class weighting and examines the benefits of tilting equity portfolios towards value and small capitalization stocks.
ALTERNATIVE ASSETS: This article examines gold, commodities, currencies, hedge funds, private equity, and venture capital and whether they add to returns or reduce risk in equity and fixed income portfolios.
STOCKS FOR THE LONG RUN: This article presents a critical analysis of the widely held belief that stocks are always the best long-term investment. It examines the uncertainty of forward risks and returns, uncertainties in timing market entry, the effects of valuations on future returns, and presents inflation adjusted return expectations in major asset categories.
ASSET ALLOCATION FOR BEARS: This article presents three strategies for minimizing risk in bear markets and examines the returns of equities, bonds, commodities, gold, and home ownership in equity bear markets.
TACTICAL ASSET ALLOCATION: This article examines empirical research on asset class timing models and concludes they are unlikely to add value.
INFLATION PROTECTION: This article defines deflation and inflation, presents views on the causes of inflation, examines the trustworthiness of government statistical data, and looks at the history of inflation. It also examines the response of equities, bonds, real estate, gold, commodities, and inflation-protected bonds to inflation.
STOCK TRADING: This article presents research on the underperformance and hazards in stock trading strategies as opposed to passive and indexed portfolios.
ACTIVELY MANAGED MUTUAL FUNDS: This article presents research showing that past mutual fund performance doesn't predict future performance, that "hot" mutual fund managers can't be chosen in advance, that mutual fund rating services are of little or no value, that actively managed funds don't do better in bear markets, and that actively managed funds are far more expensive to own than passive and index funds.
FIXED INCOME INVESTING: This article examines evidence that active fixed income management almost never outperforms passive fixed income portfolios, that economists can't predict the future of interest rates, and that bond rating agencies have a conflict of interest with bond investors. It also covers other topics of concern to fixed income investors.
REBALANCING: This article examines research on rebalancing strategies and why fixed rules should not be employed. Rebalancing is not certain to augment long term returns.
TAX LOSS HARVESTING: This article critically examines the underlying assumptions of tax loss harvesting and its value, if any, to investors.
TAX EFFICIENCY: This article compares the tax-efficiency of active versus passive management and high turnover rates and capital gains issues in actively managed portfolios.
HIGH DIVIDEND EQUITIES: This article examines high dividend equity indexes as an alternative means of capturing the value premium while generating income.
ECONOMISTS AND ECONOMICS: This article examines how past asset class returns and standard deviations are variables dependent on real-world events and economies, how economics is a social science and not a hard science, and how the use of sophisticated statistics and complex equations does not make economics a science. Data is presented showing economic predictions are no better than chance guessing, and examines how economists have a conflict of interest with consumers of economic information.
FINANCIAL SUPERSTRUCTURES: This article examines institutions and businesses which operate within, wield power over or are associated with the financial and banking industries. It covers the Federal Reserve and central banks, shadow banking, economics and economic statistics, the US political system and lobbyists, corporate financial engineeriing, high frequency trading, regulatory agencies, institutional financial services, the financial media, and retail financial services. These many market related structures continually evolve and change and influence market risk and return yet cannot be quantified like much of modern finance and they also create a non-quantifiable but substantial risk for investors.
BOOK REVIEW-"THE GREAT DEFORMATION": This book review presents a synopsis of David Stockman's analysis of deformations created in the pricing structure in financial markets from 1980 to 2010 by the policies of the Federal Reserve and economic central planning by the US government. It advances the thesis that the price of money is the most important price in the financial system and determines the prices of other assets.
BOOK REVIEW-"THIS TIME IS DIFFERENT": This book review presents a synopsis of Reinhart and Rogoff's study of 800 years of banking crises across 66 countries. It looks at debt accumulation as a risk factor, debt ratios for the US and other countries, and how systemic distortions involving debt led to the 2008 financial crisis. It highlights the risky assumption commonly believed in credit bubbles that "This Time is Different".
CONCLUSION: EAM would argue that investors make better investment decisions when they understand not only statistical research on optimal investment portfolios but also the fact that investing is not a science, past returns do not necessarily predict future returns due to very high variance in financial returns, and that the underpinnings and structure of financial markets and the data they generate are always changing and present an unstable unpredictable picture. They are not constants. The most reliable means of capturing market returns for any given investment allocation are to invest through passive and index portfolios at low cost and maintain them over long time frames. Understanding how portfolios are constructed and the risks involved also helps make investors better prepared to handle inevitable financial market volatility and frustrating disappointments.