Muscular Investing

Brian Livingston
About the author: is the author of Muscular Portfolios (2018), which reveals the 21st century's best-performing long-term trading strategies, and coauthor of 11 Windows Secrets books (1991-2007). He has been assistant IT manager of UBS Securities, a consultant to Morgan Guaranty Trust (now JPMorgan Chase), and technology adviser to Lazard Ltd., all in New York City. His columns appear in the Muscular Investing blog most Tuesday and Thursday mornings. Learn More

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Muscular Investing

Tracking Error is the Challenge All Investors Must Meet - part 4

by Brian Livingston

Beating the market in every up AND down month is a ‘yeti portfolio’ — a myth, a dream. Today’s computerized traders would overgraze any such system. • Every strategy that outperforms the S&P 500 over complete bear-bull market cycles MUST have years of underperformance. Impatient investors think these formulas ‘don’t work,’ which keeps the strategies from becoming overused and worn out. • Parts 1, 2, and 3 of this column appeared on Feb. 5, 7, and 12, 2019. • Why can’t someone invent a strategy that goes up more than the S&P 500 every time the index goes up? Read More 

Muscular Investing

Tracking Error is the Challenge All Investors Must Meet - part 3

by Brian Livingston

The Dow Jones Industrial Average has beaten the S&P 500 for decades. But people love the S&P. Why? Because they don’t know how to use tracking error. • Over the past 21 years, the DJIA has delivered 32% more gain than SPY. But traders shun the Dow. (SPY has 22 times the trading volume of DIA, the ETF that mirrors the Dow.) Mastering tracking error enables you to put more money in your pocket. • Parts 1 and 2 of this column appeared on Feb. 5 and 7, 2019. • As we saw in Part 2 of this column, virtually every US investment Read More 

Muscular Investing

Tracking Error is the Challenge All Investors Must Meet - part 2

by Brian Livingston

When does a tortoise beat a hare? When it’s an investing strategy that lags the market for months or years but keeps chugging along and wins in the end. • Separate studies by the Hulbert Financial Digest and the Vanguard Group reveal that market-beating funds underperform the S&P 500 for five years or more. Tracking error can make you give up on a winning formula — unless you know the secret. Figure 1. Like a tortoise, a winning formula can fall behind the S&P 500 for years at a time but produce superior gains over the long term. Photo Read More 

Muscular Investing

Tracking Error is the Challenge All Investors Must Meet

by Brian Livingston

When your system lags behind the S&P 500, what do you do? Jump to something else? Staying the course with a working long-term system is a better plan. • Every mechanical investing formula has tracking error: times when it underperforms whatever index you care to use. The systems with the best long-term performance all lag their benchmarks for five years or more. Most people bail out. Will you? Figure 1. The S&P 500 is more overbought than in 1929, at the beginning of the Great Depression, and almost as overvalued as in December 1999, before the global financial crisis Read More 

Muscular Investing

Jack Bogle Reveals Investing Secrets in Tell-All Book - part 4

by Brian Livingston

Would you like to know how to have an extra 1 trillion dollars in your pockets? Bogle did it — and you can benefit. • By some estimates, the Vanguard Group lowered fees so much that its shareholders alone saved a cool $559 billion. In addition, the ‘Vanguard Effect’ forced competing fund providers to collectively lower their fees an equal amount. Fees you don’t pay compound in your account. • Parts 1, 2, and 3 of this column appeared on Jan. 15, 17, and 22, 2019. In his personal life, Bogle was incredibly frugal. Maybe it was because he was born in the Great Read More 

Muscular Investing

Jack Bogle Reveals Investing Secrets in Tell-All Book - part 3

by Brian Livingston

Bogle’s secret in building America’s largest fund provider is setting it up from the beginning as a ‘mutual’ organization, similar to a worker’s cooperative. • Vanguard doesn’t own its funds, the funds own Vanguard and can make the firm lower its fees to benefit investors. It’s a hilarious irony that Vanguard’s socialist model has beaten Wall Street’s wealth-management firms at their own game. Figure 1. A life-size statue of Jack Bogle stands on the Vanguard corporate campus in Malvern, Pennsylvania. Photo by Blair duQuesnay/The Belle Curve. Read More 

Muscular Investing

Jack Bogle Reveals Investing Secrets in Tell-All Book - part 2

by Brian Livingston

Bogle’s new book, Stay the Course, reveals one little thing individual investors do that costs them one-third of their return — but is easily prevented. • A difference between the trading of investors in traditional index mutual funds and that of investors in the flashier index exchange-traded funds (ETFs) explains a lot about the varying amounts both groups end up putting in their pockets. • Part 1 of this column appeared on Jan. 15, 2019. • John Clifton Bogle passed away on Jan. 16, 2019, four months shy of his 90th birthday. My hope is that, by understanding his Read More 

Muscular Investing

Jack Bogle Reveals Investing Secrets in Tell-All Book

by Brian Livingston

John C. Bogle — known to all as ‘Jack’ — has been advocating the simplest portfolio strategies for decades. Surprise! They’ve outperformed the S&P 500. • In the last book he says he’ll ever write in his lifetime, the legendary index-fund pioneer lets fly with some scathing but profitable revelations about mutual funds, ETFs, and the colorful cast of characters who made them all come to life. Figure 1. Bogle in 2016. Photo by Daniel Burke/Institute for the Fiduciary Standard/CC-BY 4.0. • More than 100 million households in the US Read More 

Muscular Investing

Which ETFs Will Outperform This Month? Here's the List - part 4

by Brian Livingston

If you want the best raw performance over the long term, expanding your menu to 13 asset classes, plus a simple mechanical formula, is just the ticket. • Standing on the shoulders of giants in finance — including Nobel Prize winners — ETF pioneer Mebane Faber developed and publicly disclosed the best way to select the low-cost index funds that are most likely to outperform in the coming month. Figure 1. Faber is co-author of the 5-asset Ivy Portfolio and the architect of an improved 13-asset strategy, which the book Muscular Portfolios calls the Papa Bear Read More 

Muscular Investing

Which ETFs Will Outperform This Month? Here's the List - part 3

by Brian Livingston

Jack Bogle, the founder of the Vanguard Group, has urged investors for over two decades to hold a simple 50/50 portfolio: half US stocks and half US bonds. • The book Muscular Portfolios calls this ‘the Baby Bear Portfolio.’ On first glance, it strikes many traders as too simple to work. But over the past 46 years, it’s delivered almost the same total return as the S&P 500 with much smaller losses. Bogle addresses the Council of Institutional Investors in 2005. Photo by Ken Cedeno/Bloomberg/Getty Images. • Parts 1 and 2 of this Read More 

Muscular Investing

Which ETFs Will Outperform This Month? Here's the List - part 2

by Brian Livingston

The secret to long-term performance is not letting your portfolio skyrocket during bulls. Instead, keeping your losses small in bears is the key. • A clone of a strategy by Steve LeCompte delivers on both counts using simple rules. Surprisingly, it has similarities to the way Warren Buffett racks up his huge winnings in the market - and it’s easy for you to do the same. • Part 1 of this column appeared on Jan. 1, 2019. • I mentioned in Part 1 of this column that Warren Buffett’s portfolio, which trades under the symbol BRK/A, doesn’t beat the S&P 500 Read More 

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