It's easier to invest $100,000 than it is $100 million. As hedge funds grow, the inherent hurdle they most often encounter is capacity. The larger the fund, the more difficult it becomes to capture the inefficiencies in the market for additional limited partners. It comes down to the semi-exaggerated phrase, "how can you beat the market, when you are the market." Nimbleness is a virtue of investment management. The easiest analogy is one of nautical term. A 22-foot ski boat can go from full speed in one direction and complete a 180 degree maneuver in a matter of seconds. A crash stop maneuver (from 'full ahead' to 'full reverse') on a fully-loaded supertanker can take almost two miles over a 14 minutes period. Its turning diameter alone is almost 1.2 miles. Ideally, one would rather be in the investment equivalent of a ski-boat.

The same can be said

In looking at the returns of dividend strategies, we must ask, have dividend growth investing styles moved out of favor over the last four years? Consistent growth in dividends can be a good value metric, but determining which stocks to buy out of that group can skew results significantly.

A few weeks ago, Canada's Globe and Mail, ran a Number Crunchers article seeking:

steady dividend growers with a dash of momentum…[in order to] reflect a couple of investing styles that are very popular right now.

They sought U.S. and Canadian companies that had consistent dividend growth over five years and paired that by companies that have enjoyed strong recent stock returns. The names were sorted and presented with the 20 stocks that had the greater year-to-date returns. Names such as Best Buy (BBY), Pitney Bowes (PBI) and Heinz (HNZ) topped the list. I

"Investing is the intersection of economics and psychology." Truer words may not have been written than those by Seth Klarman in his annual letter to limited partners of the Baupost funds.

We have noted for some time at the Bloodhound Exchange that government efforts (particularly the Fed) to maintain a balanced economy have created a skewed risk/return environment.

The Fed's ZIRP (Zero Interest Rate Policy) has created a ceiling (and essentially a floor) on the observed risk-free rate. The theory behind ZIRP is that low interest rates stimulate investment while allowing consumers and businesses to finance more easily and discourages banks from hoarding capital, equating to more production and lower unemployment. Lower rates have an added bonus of allowing the government to spend under Keynesian economic theory without the penalty of a burdensome interest carry.

However, as with most actions, there are also unintended consequences. Abnormally low rates

In a week ago's edition, Barron's featured a piece, "Cashing in on Capex", that linked capital expenditures and stock market returns. There were two themes embedded within the article: "Capex is important to stock investors because it signals that managers are spending money to finance growth, and because it bodes well for sellers of capital equipment." Although the latter may be true, the concept that an increased investment spending environment is good for the stock market has been contradicted by piles of academic research.

It's a logical conclusion, and an easy mistake to make. Even we noted in our blog post of January 30th that "Business Investment contribution to GDP was 1.19%. The rebound in business investment does point to some fundamental economic strength and optimism." Similarly, the Barron's article notes, "private investments in equipment and software jumped 12.4%, the biggest increase in five quarters.

Real returns -- i.e., returns adjusted for inflation -- have been very poor, and based on today's factors are expected to remain poor. The previous decade was one of the worst -- the third worst, to be exact -- for blended investment returns. And that return was buoyed by bond returns that were just slightly below long-term historical average. Given the absolute level of bond yields today, it will be immensely difficult for large institutional investment plans (pensions, endowments, and other retirement plans -- including ones run by individuals) to reach benchmarks anywhere near their targets.

We are emerging from the lowest equity nominal return decade, and the second-lowest nominal blend since 1871. Over the last 140 years, the annualized return of the U.S. equity market has been approximately 9%. Excluding the 1890-1910 period, the average returns in equity are closer to 9.5%. However, nominal equity returns during the "lost

One Last Hurdle

Is it the euphoria induced by a fast start out of the 2013 gate that has individual investors finally ready to join the party? Maybe it's the steadily improving employment and housing data that's supplying the renewed confidence in the economy. Or possibly, it's the paltry interest earned on savings and bond investments that have become too depressing while watching equities continue to soar. Regardless of why so many investors are joining the party, the question to ask is, should I be one of them?

The pessimists will say this rally is exhausted, and a pull-back is both healthy and imminent. On the other hand, the optimists will point to a stellar corporate earnings season as a sign the rally will continue. We'll save you the suspense -- the market will not continue to rise 5% month (80% annualized), nor are we going revisit the March 2009

Growth and value are ubiquitous names in the mutual fund and investing business, but are rather vague in their descriptive nature. With names like Discover Growth and Opportunity Growth, Morningstar lists thousands of funds with a growth focus, and an equal number of value funds.

The Alliance Bernstein Large Cap Growth Fund prospectus lists the research focus as companies with high sustainable growth prospects, high or improving return on invested capital, transparent business models, and strong and lasting competitive advantages.

The same firm's Value fund lists that its focus is to identify a universe of securities that are considered to be undervalued because they are attractively priced relative to their future earnings power and dividend-paying capability. The prospectus goes on to say,

The research staff focuses on the valuation implied by the current price, relative to the earnings the company will be generating five years from

In the second half of 2011, screens that stressed high-dividend yields combined with high levels of working capital led to the most successful investment strategies. So far in 2012, defensive dividend payers have continued their role of outperformer in most portfolios. However margins have begun to creep toward center stage as investors appear to be shedding the current income requirement in search of value.

If you're an investor who identifies with a revived willingness to venture from the fallout shelter, you're not alone. At this point, it may only be a toe in the water of the "risk on" pool, but it's a start. Investing with a slowly increasing level of risk tolerance can be done wisely by focusing on companies with a historically successful mix of fundamental characteristics.

For example, the strategy assumes a total investment of $100,000, and a 12-month holding period. From the universe of domestically

Low beta investing strategies appear to be picking up fans thanks to a recent spate of academic research promoting the idea that investors can achieve market returns, while limiting volatility, by investing in certain low beta stocks. However, a screening for domestically listed stocks, with a beta under 0.6, yields almost 300 different equities. Few money managers, let alone individual investors have the time, motivation, or know how to sift through that many stocks. But using history as your guide, building a portfolio of fundamentally strong, low beta stocks can be simple.

By back testing several combinations of screening parameters I was able to zero in on the best filters to combine with a low beta requirement. The following strategy assumes a total investment of $100k, and a 12 month holding period. From the universe of domestically traded equities I screen for companies with a market cap of at least

Mutual funds or individual stocks? How does an investor choose and what are the costs associated with both?

Total mutual fund investment is estimated at around $25 trillion. The primary reason for the popularity of these products is simplicity. These instruments offer very easy access to a previously implemented investment strategy. But this simplicity comes at a cost in the form of fees, stale positions and inefficiencies.

The expense ratio is the most common way of evaluating the cost of owning a mutual fund. The expense ratio measures marketing costs, distribution costs and management fees as a percentage of assets under management. On average this fee runs just under 1%. This fee is of course avoided completely by selecting individual stocks as there is no need to market your portfolio and it is unlikely that you'll be paying yourself a management fee.

Many funds lack the tax efficiency that can