Fama: Proceed with caution in 2013

You and your clients have a few things to worry about this coming year, says finance-theory pioneer Eugene Fama.

The economist recently told the Financial Analysts Journal that investors have to remember three key points when tweaking their financial plans and portfolios. They are:

• Active managers are hard to choose well and can’t beat the market. Read: How (not) to choose a mutual fund manager

• The 2008 financial meltdown was primarily triggered by politics rather than financial failure. Read: Talks stall in Washington

• Inflation is imminent. Read: Higher inflation is coming: Poll

Regarding inflation, he says, the “Fed has abandoned its most potent tool for controlling inflation, which is the monetary base of currency plus reserves…The real value of government debt might disappear, but the economy is likely to disappear with it”

Find out why, and read more on the challenges investors will face in 2013.

Also read:

Inflation isn’t a threat…for now

Investors shouldn’t worry about inflation

Active managers fare better in bear markets

Large cap managers underperform

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