A Time to Rebalance. What is Smart Beta?
Mariposa Capital Management, LLC
Newsletter: Sept 2014

A Time to Rebalance

With volatility picking up a bit in foreign and emerging markets, now may be a good time to check if a rebalance is needed.

Rebalancing not only keeps the risk profile of your portfolio where you intended it to be, it also allows you to capture the performance benefits of diversification.

Featured Article

What is Smart Beta?

When investors talk about indexing, that has traditionally meant something that looks like the S&P 500 index. In recent years, indexing has grown far beyond its traditional roots and it now seems more common for index funds and ETFs to track indexes that look nothing like the S&P 500. Most of these new funds are commonly referred to as "smart beta" funds. It's an ill defined term, but let's explore what it means.

The Traditional Rules

Ignoring the technical details, the two primary characteristics of traditional indexes are:

  1. Broad coverage of the intended asset class.
  2. Weighting by size (market cap).

Some of the most popular indexes are constructed this way: the S&P 500, MSCI EAFE, Wilshire 5000, etc. The S&P 500 aims to represent large US companies, so it contains 500 large US companies (Rule #1) and it weights them by market cap (Rule #2).

Breaking the Rules

If all indexes were set up this way, academics and fund companies wouldn't have anything interesting to do. So the obvious solution is to break the rules.

The first approach was to break Rule #1 by targeting ...

Read the rest of the article

Blog Articles

The Difficult Path to Investment Success
The toughest qualification for being a successful investor is the ability to stick with a strategy even when it’s not working. Even when the strategy is making you look foolish. Even when there was much money to be made by ...

Are Markets Efficient?
When I tell people that I use index funds and ETFs to build client portfolios, they seem a bit surprised that I would consider markets to be efficient.

Value and Momentum: July 2014
Let’s look at what our value and momentum analysis of asset classes told us in July 2014.

Interesting Reads

The Most Fascinating Profile You’ll Ever Read About a Guy and His Boring Startup -- Wired
Stewart is hungry. He’s munching on potatoes smothered in chicken fat drippings, sitting by a long metal table that once served as a gurney in the morgue at the Treasure Island Naval Base. It’s a prominent piece of furniture .../p>

Swedroe: A Close Look At Value & Momentum -- ETF.com
Two of the most studied capital market phenomena are the value effect, where value stocks outperform growth stocks; and the momentum effect, where recent relative performance predicts near-term returns.

A Billionaire Mathematician’s Life of Ferocious Curiosity -- NY Times
James H. Simons likes to play against type. He is a billionaire star of mathematics and private investment who often wins praise for his financial gifts to scientific research and programs to get children hooked on math.

About Mariposa

Mariposa Capital Management is a boutique investment advisory firm designed for individuals and families who want a more thoughtful way to invest.

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