A Straight-Forward Way to Generate Above-Market Returns

Barry Ritholtz

21 Oct 2019, 11:33 PM IST

(Bloomberg Opinion) -- Can you generate market-beating returns, or alpha, above and beyond the stocks you pick or by managing to time the markets? Yes, says Fran Kinniry, global head of portfolio construction at Vanguard Group, and this week's guest on Masters in Business.

In 2001, Kinniry’s team created the concept of what the firm calls investor’s alpha, which is based on the idea that professional advice can add substantially to an individual's investment performance. He said that anywhere from 150 to 300 basis points of annual return can be added via a combination of financial planning, tax-loss harvesting and -- most of all -- behavior management. He also notes that many people lack the time, willingness and ability to manage their own portfolios well: People with those characteristics derive the greatest benefits from professional financial planning, earning benefits that exceed the costs.

Kinniry’s His favorite books are here; a transcript of our conversation is available here.

You can stream/download the full conversation, including the podcast extras on Apple iTunes, Overcast, Spotify, Google Podcasts, Bloomberg and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.

Next week, we speak with economics Nobel laureate Michael Spence about his work on the dynamics of information flows and market structures, and his book, "The Next Convergence: The Future of Economic Growth in a Multispeed World."

To contact the editor responsible for this story: James Greiff at jgreiff@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Barry Ritholtz is a Bloomberg Opinion columnist. He is chairman and chief investment officer of Ritholtz Wealth Management, and was previously chief market strategist at Maxim Group. He is the author of “Bailout Nation.”