The U.S. inflation rate remains stubbornly high, clocking in at 8.3% for this week’s latest reading.

Many people think this gives the Fed even more ammunition to continue raising short-term interest rates from their current levels of around 2.5%. Rates could get as high as 4-5% before all is said and done.

Why do we stay when a fund manager underperform?  According to the SPIVA scorecard produced by the S&P Dow Jones Indices, over the last 15 years almost 84% of actively managed Australian equity general funds underperformed the S&P/ASX 200.

Furthermore, the S&P persistence index Australian persistence scorecard has shown that any success can be short lived. Only a minority of Australian high performing funds persisted in outperforming their respective benchmarks or consistently stayed in their respective top quartiles for three or five consecutive years.

Human beings understand the world through story-telling. The organising narrative structure of a beginning, a middle and an end helps us make sense of complexity. But in the world of investment, our need for tidy narratives can steer us in the wrong direction.

The human predilection to see events as stories, where causes and effects are neatly laid out, is the underlying imperative for almost all news media, in which journalists are required to force often messy and unrelated events into emotionally satisfying narratives.

Even during periods of rising interest rates, they can still help control risk.

Bonds are suddenly the asset class everyone loves to hate. In response to the resurgent inflation that started in late 2020, the Fed has hiked interest rates four times so far in 2022, raising rates by a total of 225 basis points. In response, bonds have suffered some of their worst losses in decades. In the first six months of 2022, for example, the Bloomberg U.S. Aggregate Bond Index dropped 10.35%—its worst showing in more than four decades.

As I’ve gotten older the part of pop culture where I’ve fallen behind the most is music.

There aren’t many new artists I like so I mostly end up listening to older music.

There could be a get-off-my-lawn nostalgia thing going on here but the data shows I’m not alone.

When I was growing up, our local newspaper, the Kansas City Star, was full of news and had one page for opinion. After decades of cable news and nonstop digital postings, I see more opinions these days than news. That’s not a bad thing. But when it comes to investing, it’s crucial to remember the difference between news and opinion, and how they are sometimes used to forecast the future.

Nasty market conditions cause our savings to fall in value and make us re-visit our lifestyle choices. Should you take less income this year? Should you delay retirement? Should you stop investing? I don’t believe so.

The slowish motion sharemarket crash since the start of 2022 took another hit last week with US inflation coming in at 8.6% annually to May. Shares groaned and slid again. It’s the worst price rise in 40 years (since 1981). Americans have never experienced the Kiwi inflation pin-ball machine of the 1980s where our annual prices pinged around between 6% and 17%.

In The Lucifer Principle, Howard Bloom tells the story of four tribes that lived in the Nilgiri hills of India prior to the arrival of the Europeans:

One tribe, the Badaga, were farmers. Another, the Kota, were craftsmen. A third, the Toda, were herdsmen. And the fourth, the Kurumba, made and raised almost nothing at all…But of all four tribes, the one with the greatest economic power was the Kurumba.

While the All Blacks are one of the world’s most successful sports teams, Kiwi rugby fans have learnt not to expect them to win the World Cup at every tournament. Likewise, while the NZ share market has punched above its weight over the years, that doesn’t mean it is going to be a winner every time.

Periodically, pundits declare the death of the 60% stock/40% bond portfolio. Their voices have grown louder lately, amid sharp declines in both stock and bond prices. But we’ve been here before. Based on history, balanced portfolios are apt to prove the naysayers wrong, again.

Approaching the midpoint of 2022, market, economic, and geopolitical conditions all appear fraught. Inflation is hitting 40-year highs, the US Federal Reserve is sharply reversing monetary policy, the pandemic hasn’t gone away, and supply chain woes have been exacerbated by COVID-19 lockdowns in China and Russia’s invasion of Ukraine, with the latter putting the Western bloc the closest to a war footing in decades.

The impact of being out of the market for just a short period of time can be profound, as shown by this hypothetical investment in the stocks that make up the Russell 3000 Index, a broad US stock market benchmark.

A hypothetical $1,000 investment made in 1997 turns into $10,367 for the 25-year period ending December 31, 2021. Over that same period, if you miss the Russell 3000’s best week, which ended November 28, 2008, the value shrinks to $8,652. Miss the three best months, which ended June 22, 2020, and the total return dwindles to $7,308.

A lot of people are stressed out about a lot of things right now. Markets are down. Prices are up for many of the things you need to buy. Interest rates are rising and make it a confusing time to consider buying or selling a house, or making other major financial decisions. This all adds to the stress you may be feeling about your job, the ongoing pandemic, and the health of loved ones.

The year is half over. Or half begun, depending where you fall on the optimism/pessimism scale. Give yourself a pat on the back for getting this far. As we know from 2020 and 2021, things could be a lot worse. But let's not overdo the patting because they could also be a lot better.

Sudden market downturns can be unsettling. But historically, US equity returns following sharp downturns have, on average, been positive.

When it comes to investing, we need to distinguish between two very different types of risk: good risk and bad risk. Good risk is the type that you are compensated for taking. The compensation is in the form of greater expected returns. For example, equities are riskier than fixed-income investments.

Therefore, equities must compensate investors by providing greater expected returns.

We are living in a time of extreme uncertainty and the anxiety that comes along with it. Against the backdrop of war, humanitarian crisis, and economic hardship, it’s natural to wonder what effect these world events will have on our long-term investment performance.

While these challenges certainly warrant our attention and deep concern, they don’t have to be a reason to panic about markets when you’re focused on long-term investing.

The world has been through wars, depressions, financial crises and pandemics in the past century, yet there has been a positive long-term return on stocks. Why does the stock market go up over the long term? It’s pretty simple, writes Ben Carlson. The economy grows over time, and businesses innovate and create wealth.

Around the world, individuals are being asked to take on greater responsibility for their own retirement. In the US, for example, a combination of limited Social Security funding and a reduction in the number of defined benefit (DB) employer plans—historically, the primary retirement savings vehicle for many—is causing investors to make decisions they have never had to face about how to save for retirement.

With broad market indices recently hitting record highs, many investors have expressed fear of investing available cash before a market correction.

Are those fears justified? Is it better to invest right away—“plunge”—or is it better for investors to tiptoe into the market over time, aka “wade?”

In a recent “Strategies” column by New York Times writer Jeff Sommer, Eugene F. Fama shared his thoughts on the behavior of markets—and people—during times of volatility.

Fama, a Nobel laureate who is widely recognized as the “father of modern finance,” spoke about the information markets can provide during times of uncertainty and what inevitably remains unknown.