Investing and portfolio construction
How ordinary portfolios are built and what the long-run data says about them. These guides cover fund structures and their costs, options and bonds, allocation rules such as 60/40, the factors behind returns, and the measures used to judge risk.
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ETF vs mutual fund: costs, taxes and trading compared
Expense ratios, capital gains distributions, spreads, disclosure and minimums, with 2025 data and the new ETF share classes.
6% vs 57%
equity ETFs against equity mutual funds that paid a capital gains distribution in 2025
$13.4T
US ETF assets at the end of 2025, against 31.4 trillion dollars in mutual funds
Sharpe ratio: formula, a worked S&P 500 example and the limits
The formula worked through on ten years of S&P 500 returns, annualizing with the square root of 12, what a good ratio looks like in the data, and where Sortino, Treynor and Calmar differ.
Risk parity: how equal risk weights are calculated, the leverage and the 2022 losses
Why stocks carry about 92% of a 60/40 portfolio's risk, a worked three-asset equal risk example, what the leverage costs, and what risk parity funds did in 2013 and 2022.
Options explained: calls, puts and covered calls with worked examples
Calls, puts, covered calls and protective puts priced and followed to expiration, with the Greeks, assignment, broker approval, US taxes and 0DTE risk.
Factor investing: value, momentum and quality, and what the research found
From CAPM to the five-factor model, the premiums measured since 1927, value's 57.8% drawdown, the factor zoo and what smart beta ETFs charge.
Dollar-cost averaging vs lump sum: what the historical data shows
How often a lump sum has beaten a monthly schedule since 1934, by how much, and what spreading the money out does to losses, regret and 401(k) savings.
The 60/40 portfolio: returns since 1928, the 2022 loss and the alternatives
Returns and drawdowns of a stock and bond mix since 1928, why both halves fell in 2022, how rebalancing works, and the 40/30/30, 50/30/20 and risk parity variants.