1. A study from the Harvard School of Public Health published August 4, 2015, in the British Medical Journal found that people who ate spicy foods almost every day had a 14% lower risk of death than people who ate spicy foods once a week (Harvard Health Publishing, 2015). The study, conducted through the China Kadoorie Biobank, uses a population-based prospective cohort of over a half-million adults from 10 geographically diverse areas across China.
2. December 31, 1999, through December 31, 2009.
3. Asset Allocation Interactive is updated quarterly with the most recent expected returns data.
4. On the scatter plot, the grey dots depict the efficient portfolios along the efficient frontier (the dashed line). Please note that AAI deals with assets classes in the form of market indices and does not include investible vehicles. This approach gives investors the freedom to choose their own investing vehicle. In moving from indices to investment vehicles, however, costs will be incurred. Explicit costs, such as expense ratios, can easily be found on fund provider websites, but other meaningful costs, such as those incurred by fund providers tracking indices, especially in less liquid or high transaction cost markets, are not easily determined, but also lower investor returns.
5. Previously in this series, West and Ko (2017) discussed how Research Affiliates thinks about and models future expected returns (both income and capital appreciation), and Shepherd (2017) examined how we model estimated risk, so we won’t cover those details again here. Because tax situations are investor specific, Asset Allocation Interactive does not currently consider taxes. Interest and dividend income and capital appreciation can have a meaningfully different impact on investors’ realized return due to tax considerations.
6. For investors who view valuation as a driver of return, severe price declines, and the undervaluation that accompanies them, can often be thought of as bargain-buying opportunities, but for other investors these declines elicit deep fear. To reach a long-term investment horizon, investors will necessarily experience one or more short-term periods of underperformance in their portfolios, requiring that they overcome a perhaps visceral reaction to abort the long-term diversifying strategy.