Morningstar Advisor - October/November 2009 - 10

Contributors Michael Pompian Michael Pompian, whose article on behavioral finance leads our Spotlight section (page 32), has been in the financial advisory business for nearly two decades. He has worked in a major brokerage firm, a private bank, a family office, and is now the director of private wealth investment consulting for Hammond Associates in St. Louis. He became interested in behavioral finance while taking the CFA curriculum in the late 1990s. “I was learning about the efficient-market hypothesis,” he says. “At the same time, I was watching the technology stock bubble take place. I couldn’t reconcile those two ideas.” He has been writing about behavioral finance and applying it in practice ever since. He writes a monthly article on behavioral finance for MorningstarAdvisor.com. John Rekenthaler John Rekenthaler stumbled into Richard Thaler’s management class in 1996 at the University of Chicago’s Booth School of Business. “It was a required course, it fit into my schedule, and all I knew about the surname ‘Thaler’ was that it was half as good as mine,” Rekenthaler says. It turned out that Rekenthaler had not only unwittingly booked the nation’s leading behavioral economist, but he had also gotten the guy who would later become the school’s most popular instructor. Thaler is a big believer in the power of anecdote to make theory become reality in his students’ heads. “My single most vivid memory of my MBA career is when he showed the tape of a play from a Royals-Yankees playoff game from the late 1970s,” Rekenthaler says. “The lesson was about decisions being evaluated before the result, as opposed to afterward. We saw how the third-base coach had surely made the correct decision in waving the runner home, only to be fired after the game when George Steinbrenner blew up after the runner was thrown out at the plate on a brilliant throw from left field. In addition to ensuring that we learned the lesson about second-guessing good decisions that went bad, Dick shared with us his vociferous dislike of Steinbrenner. This was just before the Yankees started to collect world championships again, so I’m thinking that perhaps Dick has since mellowed his views, being the diehard Yankee fan that he is.” Rekenthaler and Thaler reunite for our article “A Call for Nudges” (page 43). Jim Licato As research and communications manager of the financial communications business at Morningstar, Jim Licato and his team are responsible for translating analysis and financial concepts into easy-to-understand visual images, presentations, and articles that help advisors explain investing to clients. Licato’s latest contribution to the group’s content library is a module titled, “Investor Behavior,” parts of which appear in this issue’s Spotlight (page 40). “Investors make many financial decisions through their perceptions and based on their emotions,” says Licato, who also regularly contributes to the magazine’s Investment Briefs section. “It is imperative that advisors and investors understand and combat the myriad of illusions they may be prone to.” Licato is a die-hard Chicago Cubs fan and continues to root for his Cubbies even though they disappoint each and every year—perhaps this is an illusion that Licato needs to conquer. Julien Pacaud Julien Pacaud created the illustrations in this issue. Pacaud, who lives in Paris, says he is self-taught and influenced by surrealism. He uses Adobe Photoshop “to bring to life surrealist universes, which I like to call ‘perpendicular dreams.’ “ His illustrations have appeared in publications such as Le Monde and The New York Times and on CD covers and in advertising. Pacaud didn’t have much experience working with financial topics, but it was a challenge he welcomed. “As an illustrator, I’m often asked to work on subjects that are very far of my personal interests and knowledge,” Pacaud says. “It’s interesting to find a way to bring these themes into the surreal worlds I like to create.” 10 Morningstar Advisor October/November 2009
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Morningstar Advisor - October/November 2009

Table of Contents for the Digital Edition of Morningstar Advisor - October/November 2009

Morningstar Advisor - October/November 2009
Contents
New on MorningstarAdvisor.com
Letter from the Editor
Contributors
How Do You Use Behavioral Finance in Your Practice?
Investing in the Moment
Investment Briefs
How the Best Large-Cap Managers Rise Above the Rest
Don’t Give Up on Stocks Just Yet
Makeup of the Mind
A Top-Down Approach
In Practice: Patterns of Investor Irrationality
A Call for Nudges
The Furious Comeback of Emerging Markets
Junk-Bond Pioneer
Four Picks for the Present
Consumer Staples Hold Up in the Kitchen
Familiarity Can Breed Bad Investment Decisions
Leave the ‘Junk Rally’ Behind and Look for Quality at a Reasonable Price
Mutual Fund Analyst Picks
50 Most Popular Equity ETFs
Undervalued Stocks
New at Morningstar
Meet the New Boss, Same (School) as the Old Boss
Morningstar Advisor - October/November 2009 - Morningstar Advisor - October/November 2009
Morningstar Advisor - October/November 2009 - Cover2
Morningstar Advisor - October/November 2009 - 1
Morningstar Advisor - October/November 2009 - 2
Morningstar Advisor - October/November 2009 - Contents
Morningstar Advisor - October/November 2009 - 4
Morningstar Advisor - October/November 2009 - 5
Morningstar Advisor - October/November 2009 - New on MorningstarAdvisor.com
Morningstar Advisor - October/November 2009 - 7
Morningstar Advisor - October/November 2009 - 8
Morningstar Advisor - October/November 2009 - Letter from the Editor
Morningstar Advisor - October/November 2009 - Contributors
Morningstar Advisor - October/November 2009 - 11
Morningstar Advisor - October/November 2009 - How Do You Use Behavioral Finance in Your Practice?
Morningstar Advisor - October/November 2009 - 13
Morningstar Advisor - October/November 2009 - 14
Morningstar Advisor - October/November 2009 - Investing in the Moment
Morningstar Advisor - October/November 2009 - 16
Morningstar Advisor - October/November 2009 - 17
Morningstar Advisor - October/November 2009 - 18
Morningstar Advisor - October/November 2009 - Investment Briefs
Morningstar Advisor - October/November 2009 - 20
Morningstar Advisor - October/November 2009 - 21
Morningstar Advisor - October/November 2009 - How the Best Large-Cap Managers Rise Above the Rest
Morningstar Advisor - October/November 2009 - 23
Morningstar Advisor - October/November 2009 - 24
Morningstar Advisor - October/November 2009 - 25
Morningstar Advisor - October/November 2009 - 26
Morningstar Advisor - October/November 2009 - Don’t Give Up on Stocks Just Yet
Morningstar Advisor - October/November 2009 - 28
Morningstar Advisor - October/November 2009 - 29
Morningstar Advisor - October/November 2009 - Makeup of the Mind
Morningstar Advisor - October/November 2009 - 31
Morningstar Advisor - October/November 2009 - A Top-Down Approach
Morningstar Advisor - October/November 2009 - 33
Morningstar Advisor - October/November 2009 - 34
Morningstar Advisor - October/November 2009 - 35
Morningstar Advisor - October/November 2009 - 36
Morningstar Advisor - October/November 2009 - 37
Morningstar Advisor - October/November 2009 - 38
Morningstar Advisor - October/November 2009 - 39
Morningstar Advisor - October/November 2009 - In Practice: Patterns of Investor Irrationality
Morningstar Advisor - October/November 2009 - 41
Morningstar Advisor - October/November 2009 - 42
Morningstar Advisor - October/November 2009 - A Call for Nudges
Morningstar Advisor - October/November 2009 - 44
Morningstar Advisor - October/November 2009 - 45
Morningstar Advisor - October/November 2009 - 46
Morningstar Advisor - October/November 2009 - 47
Morningstar Advisor - October/November 2009 - The Furious Comeback of Emerging Markets
Morningstar Advisor - October/November 2009 - 49
Morningstar Advisor - October/November 2009 - 50
Morningstar Advisor - October/November 2009 - 51
Morningstar Advisor - October/November 2009 - 52
Morningstar Advisor - October/November 2009 - 53
Morningstar Advisor - October/November 2009 - 54
Morningstar Advisor - October/November 2009 - Junk-Bond Pioneer
Morningstar Advisor - October/November 2009 - 56
Morningstar Advisor - October/November 2009 - 57
Morningstar Advisor - October/November 2009 - Four Picks for the Present
Morningstar Advisor - October/November 2009 - 59
Morningstar Advisor - October/November 2009 - 60
Morningstar Advisor - October/November 2009 - Consumer Staples Hold Up in the Kitchen
Morningstar Advisor - October/November 2009 - 62
Morningstar Advisor - October/November 2009 - 63
Morningstar Advisor - October/November 2009 - Familiarity Can Breed Bad Investment Decisions
Morningstar Advisor - October/November 2009 - 65
Morningstar Advisor - October/November 2009 - Leave the ‘Junk Rally’ Behind and Look for Quality at a Reasonable Price
Morningstar Advisor - October/November 2009 - 67
Morningstar Advisor - October/November 2009 - Mutual Fund Analyst Picks
Morningstar Advisor - October/November 2009 - 69
Morningstar Advisor - October/November 2009 - 70
Morningstar Advisor - October/November 2009 - 71
Morningstar Advisor - October/November 2009 - 50 Most Popular Equity ETFs
Morningstar Advisor - October/November 2009 - 73
Morningstar Advisor - October/November 2009 - Undervalued Stocks
Morningstar Advisor - October/November 2009 - 75
Morningstar Advisor - October/November 2009 - 76
Morningstar Advisor - October/November 2009 - 77
Morningstar Advisor - October/November 2009 - 78
Morningstar Advisor - October/November 2009 - New at Morningstar
Morningstar Advisor - October/November 2009 - Meet the New Boss, Same (School) as the Old Boss
Morningstar Advisor - October/November 2009 - Cover3
Morningstar Advisor - October/November 2009 - Cover4
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