Weekend Reading 20 February

Last week Swedish regulators said they were launching an investigation into so-called “closet trackers". These are the types of managed funds that charge steep prices but are built to simply mimic an index. Quite rightly, these rip-off funds have earned themselves a terrible name for more or less guaranteeing underperformance. And the good news is that it sounds like UK regulators are taking a closer look at this too.

The Economist picked up on the subject of fund management tricks this week, citing a paper on how the 'horizon effect' can fool investors into misreading the past performance of money managers. At Stockopedia, of course, we believe in empowering investors with the tools to outperform without the need for any kind of fund manager. For anyone that missed our recent webinar on the new launched StockRanks Portal, you can find it here.

Last week we mentioned that US quant fund management firm AQR Capital had revived the size effect in their latest research. This week we had a detailed look at why and when 'small beats big'. Reports from our resident small-cap expert Paul Scott included his views on events at stocks like Naibu and Avation. Also, in an article for Interactive Investor, we looked at how momentum investors can use the 52 Week High effect to their own benefit.

Around the web

We spent some time last year looking at the optimum ways of managing a portfolio. It's a subject that came up again this week in a blog by Corey Hoffstein on whether annual rebalancing adds value - the answer, he reckons, depends on your time horizon. Plus there was another great article from Robeco on the influence of rebalancing is when it comes to profiting from factors like value, momentum and low volatility.

Elsewhere, there was a good post by Richard Beddard at Interactive Investor on how he's changed his approach to categorising shares as 'buy', hold' or 'sell'. We name-check him a lot in or Weekend Reading, but there's another interesting piece by John Authers in the FT about buying protection against market drawdowns. He thinks that if there was a time to start paying for some protection against another major drawdown, it might well be now. That's a view apparently shared by Robert Shiller, who thinks that stock valuations look rich.

Patrick O'Shaughnessy, who writes the Millennial Invest blog, looks at why book-to-price is a decent stock election factor - but not as good at measuring value as other ratios. Ben Carlson at A Wealth of Common Sense, considers the problems with intuitive investing and why most of the time following a rule-based approach is superior to making ad-hoc decisions. Jason Voss wrote about why curiosity is a secret weapon for being a better investor for Enterprising Investor, the CFA blog. And Josh Brown (The Reformed Broker) put together his own awesome investment mix.

Finally, in a week when reports emerged that messaging app SnapChat could be worth $19 billion (if it pulls of a new funding round), Justin Fox at Bloomberg offered some interesting views on how crazy that figure really is.

Safe investing!