It's time for another look behind the scenes at the AAII, tonight it's a look at the January Charts showing per Ben Inker of the firm GMO that quality boosts the returns of most types of stocks.
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AAII: January Charts of Interest: |
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I saw many people posting charts about the 2023 year-end rally as I was perusing ideas for this month’s charts of interest. I discuss how the rally has impacted sentiment, but first I want to focus on something that could have a much bigger benefit for your portfolio: the quality factor. Ben Inker of asset management firm GMO found that requiring quality boosts the returns of most types of stocks, including small-cap stocks, as well as bonds. Though investors typically get rewarded for taking risks, seeking fundamental strength instead of fundamental weakness provides more bang for dollars invested. |
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“In an investing world where most trade-offs are difficult, this one is pretty easy. If you were going to have one permanent bias in your equity and high-yield bond portfolios, it should be in favor of high quality,” writes Inker. (Note: AAII’s Model Shadow Stock Portfolio incorporates the quality factor by requiring that all holdings are profitable.) |
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