Author Archives: Devesh Shah

About Devesh Shah

Hi, I’m Devesh Shah and I’m pleased to meet you. As a professional, I was a co-inventor of the CBOE VIX Volatility Index, an equities and derivatives trader, and Partner at Goldman Sachs. My passions now mostly involve writing, teaching about investments, practicing yoga, playing the piano, and volunteering with a non-profit, Sponsors for Educational Opportunities (SEO), that opens up career and college pathways for underprivileged students of color. I am an alum of SEO. My hope for the months ahead is that I might share a few things I have learnt about investing.

To Win Today, Embrace Powerlessness and Dive Deep into the Portfolio

By Devesh Shah

“Be careful what you wish for because it might come true” – someone wise

In this article, I lead by laying out the irony in today’s Federal Reserve behavior and the financial markets. Acknowledging a tough year for the 60/40 portfolio, I look at the worst of historical drawdowns in down market cycles. I benchmark my own expectations for the 60/40 in the current cycle and invite readers to do their own work. Finally, Continue reading →

To Win Tomorrow: Question Everything

By Devesh Shah

There is a risk that 2022 is just the beginning of a treacherous investment decade. If so, it may be time to question what we know about conventional investment practices. In this article, I first highlight the so-called risk of a lost decade of real returns. Then, I raise 4 Questions we need to ask ourselves:

(1) what should be the mix between risky and riskless assets
(2) what about the active vs passive debate
(3) which assets work well during inflation
(4) which investment habits might we want to leave behind if the returns are slim.

After proposing some answers, I suggest Continue reading →

On Active vs Passive Equity Mutual Funds

By Devesh Shah

When I came across a quote by Peter Lynch on how passive fund investors were making a mistake, I had two choices: to sweep his comments under the rug or evaluate the validity of them. In the article below, we will look at:

    • Lynch’s argument
    • My researched reasons for preferring passive investing.
    • The role of confirmation bias and how it can hurt or help investors.
    • The results of a careful analysis of the performance of Mr. Lynch’s preferred funds
    • Finally, a few conclusions.

The takeaway: Outperforming MFs do exist but their taxable distributions are a larger drag than expected.

We’re inviting you to Continue reading →

Overcoming Drawdowns

By Devesh Shah

My “Thoughts on Inflation Protection” essay, which appeared in MFO’s February 2022 issue, focused primarily on the role of different major asset classes in providing an inflation buffer for your portfolio. The article was focused in particular on the performance of funds and ETFs with substantial exposure to TIPS (Treasury Inflation-Protected Securities) and similar products. I highlighted the promise of short-duration TIPS funds.

In passing, I also noted the long-term potential role of domestic stocks and Equity REITS in protecting against inflation, while mentioning their two main drawbacks. One, they do not Continue reading →

Thoughts on Inflation Protection

By Devesh Shah

An entire generation of investors has come of age without needing to learn how to protect portfolios and their wealth from Inflation. The mantra, three or four years ago, was “inflation is dead.” When inflation finally appeared last year, the Federal Reserve Chair declared it to be merely “transitory.” Sticky and low inflation for years has permitted the Fed to keep interest rates at historically low levels – a development which some fear has underwritten federal deficits, emboldened stock speculators, and punished savers. Increasingly, it appears that Continue reading →

What is Your Edge?

By Devesh Shah

Many people are heartsick after watching the stock market’s gyrations. Some of the people who are queasiest are the young investors who thought, “this is so easy!” as they booked a year’s worth of profit in a single morning, trading meme stocks or NFTs or cryptos or any of a dozen other securities they could barely explain, much less analyze. More will find their moment of reckoning as they confront Continue reading →