- The secret to great investing is patience. Take the time to study, to learn and to practice. There is no rush. Make a Wish List of liked companies and wait for them to go on sale.
- Best investors often do best during market panics, when investors dump shares in fear, or when there’s unusual volatility, such when stocks soar to unrealistic levels.
- Take advantage of the greed and fear of other investors. Investors can profit by avoiding panics, picking up stocks for cheap in sudden selloffs and keeping emotions in check, even during volatile markets.
- Human emotion inevitably causes the prices of assets — even worthwhile assets — to be transported to levels that are extreme and unsustainable: either vertiginous highs or overly pessimistic lows.
- Focus on a company’s actual earnings, revenues and cash flow, and do not succumb to rosy projections and predictions about the distant future. Ignore the sometimes-enticing stories spun by bankers, analysts and others, the kinds that have led to huge losses for even sophisticated investors in recent years on high-profile companies.
- Security prices should generally fluctuate not much more than earnings and revenues. The reasons they fluctuate more are largely psychological, emotional and non-fundamental. The truth is that financial facts and figures are only a starting point for market behavior; investor rationality is the exception, not the rule; and the market spends little of its time calmly weighing financial data and setting prices free of emotion.
- Pick your spots, and only invest in areas you have a competitive advantage, perhaps due to a unique industry expertise. For all their skill, the firm only profits on barely more than 50% of its trades, a sign of how challenging it is to try to beat the market.
- “It’s different this time” are four of the most dangerous words in the business world — especially when applied, as is often the case, to something that has reached what in prior times would have been called an extreme. People’s decisions have great influence on economic, business and market cycles. And people don’t make their decisions based on science, facts or fundamentals.
- There are more factors and variables influencing financial markets and individual investments than most realize or can deduce. Investors tend to focus on the most basic forces, such as earnings, interest rates or short-ratios, but there are dozens of factors, perhaps whole dimensions of them, that are missed.
- Cycle positioning is the process of deciding on the risk posture of your portfolio in response to your judgments regarding the principal cycles. It primarily consists of choosing between aggressiveness and defensiveness: increasing and decreasing exposure to market movements. The recipe for success consists of (a) thoughtful analysis of where the market stands in its cycle, (b) a resulting increase in aggressiveness or defensiveness, and (c) being proved right. These things can be summed up as “skill” or “alpha” at cycle positioning.
- Detecting and exploiting the extremes of market cycles is really the best anyone can hope for. Between the extremes of “rich” and “cheap” — when the cycle is in the middle ground of “fair” — the state of the relationship between price and value is, by definition, nowhere as clear-cut as at the extremes. If you frequently try to discern where we are in the cycle in the sense of “what’s going to happen tomorrow?” or “what’s in store for us next month?” you’re unlikely to find success. I describe such an effort as “trying to be cute.
- A backcast is an exercise where you imagine having reached a goal and then you work backward to figure out what happened to get you there. Backcasting is a more instinctive exercise. After all, we generally plan for success.
- A premortem imagines the opposite — failing to reach your goal — and asks “how did that happen?” Imaging failure, on the other hand, doesn’t feel good. But failing to do a premortem can ruin even well-thought-out strategies for long-term success. If we anticipate later actions that can undermine our plans, we can improve the likelihood of staying on course.
Tag Archives: Investing
Why 30 Stocks Are Better Than 100 Or 500: How The Dow Beat The Nasdaq 1999-2019 – SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) | Seeking Alpha
Since its ETF’s launch in early 1999, the Nasdaq-100 actually underperformed the Dow Jones Industrial Average on a total return basis for most of 20 years, until last week.
Both the Dow and Nasdaq have outperformed the S&P 500 on a total return basis, leaving the Dow as the clear winner on a risk-adjusted basis.
Fundamentals point to the Nasdaq’s recent catch-up as a repeat of the late 1990s run-up, meaning the Dow is likely to outperform again over the next 20 years.
The Dow’s greatest advantage is its simplicity, and this should make it a leader in the trend towards direct indexing.
If I were to ask 80 investors under the age of 80 to describe the Dow Jones Industrial Average in one word, chances are the answers would include words like “narrow”, “outdated”, or even “irrelevant”.
I’m also sure a vast majority of that same sample of “young” investors would never have guessed that this old Dow index has actually outperformed the much more modern and sexy Nasdaq-100 Index on a total return basis over most of the past 20 years. In this article, I explain: the surprising past outperformance of the Dow over the Nasdaq, and advantages I believe will make the Dow a better starting point than Nasdaq or S&P for outperformance over the next 20 years.
— Read on seekingalpha.com/article/4310588-why-30-stocks-are-better-100-500-how-dow-beat-nasdaq-1999minus-2019
U.S. – China Deal is Imminent
China’s annual Economic Work Conference is likely to convene within the next two weeks, meaning a trade deal with the U.S. is “imminent,” according to ICBC Standard Bank Chief China Economist Jinny Yan.
www.cnbc.com/2019/11/27/icbc-us-china-deal-is-imminent-due-to-beijings-upcoming-policy-meeting.html
Animal Spirits
Animal spirits refers the state of confidence or pessimism held by consumers, businesses and investors. Regarding financial markets, they represent the emotions of confidence, hope, fear, and pessimism that can affect an investor’s financial decision making, which in turn can fuel or hamper economic growth.
If spirits are low, then confidence levels will be low, which will drive down a promising market—even if the market or economy fundamentals are strong.
Likewise, if spirits are high, confidence among participants in the economy will be high, and market prices will soar.
According to the theory behind animal spirits, the decisions of investors and business leaders are based on intuition and the behavior of their competitors or other investors rather than on fundamental analysis.
Famous British economist, John Maynard Keynes believed that in times of economic upheaval, irrational thoughts might influence people as they pursue their financial self-interests. In 1936, Keyne published, The General Theory of Employment, Interest, and Money, where he postulated that trying to estimate the future yield of various stocks, companies, or financial activities using general knowledge and available insight “amounts to little and sometimes to nothing.”
Keynes referred to these psychological factors that make investors jump into the equity market — in the face of deep uncertainty and volatility, as animal spirits. He thought, only a manic, driven, strong-willed person would put capital at risk in periods of high uncertainty and volatility.
When animal spirits are strong, investment is sufficient to maintain aggregate demand; when they lag, aggregate demand falls, and the economy lapses into depression.
It is assumed that the only way people can make investment decisions in an uncertain and extremely volatile environment is if animal spirits guide them.
Source: CARLA TARDI, Animal Spirits, Investopedia, Updated Apr 20, 2019
What Are Cyclical v. Defensive Stocks? – TheStreet
Cyclical companies are those that see higher revenue growth when the economy is growing and lower revenue growth – sometimes contractions — when the economy is in recession.
Defensive companies keep humming along whether or not the economy is growing.
— Read on www.thestreet.com/video/-what-are-cyclical-v-defensive-stocks–15178611
7 Low-Risk Investments With High Returns in 2019 | TheStreet
Low-risk is a relative term when it comes to investing. The classic risk-free investment is Treasury securities, but even they carry some degree of price risk. For those looking for low-risk investments, here are some to consider….
— Read on www.thestreet.com/personal-finance/low-risk-investments-with-high-returns-15170504
John Bogle – The 7 Rules For Successful Stock Market Investing
Stay the course.
Regardless of what happens in the markets, stick to your investment program. Changing your strategy at the wrong time can be the single most devastating mistake you can make as an investor. (Just ask investors who moved a significant portion of their portfolio to cash during the depths of the financial crisis, only to miss out on part or even all of the subsequent eight-year—and counting—bull market that we have enjoyed ever since.)
“Stay the course” is the most important piece of advice Jack Bogle can give you.
John Bogle, founder of the Vanguard Group, provides his seven investing rules for successful stock market investing.
— Read on www.valuewalk.com/2017/06/john-bogle-7-rules-successful-stock-market-investing/amp/
Over half of Americans aren’t taking this simple step to grow wealth | CNBC
Over half of Americans, 55%, say they are not participating in the stock market, according to a new poll from MetLife of over 8,000 U.S. adults over the age of 18. The survey finds that age is definitely a factor. Gen Z (ages 18 to 24) and millennials (defined here as ages 25 to 34) are opting out in far greater numbers than older Americans.
But gender also plays a role — 44% of men report they aren’t investing, compared to 59% of women. And men tend to be more likely to invest in some type of mutual or index funds and stocks.
Yet when it comes to building long-term wealth, saving alone typically isn’t enough.
— Read on www.cnbc.com/2019/10/09/over-half-of-americans-arent-taking-this-simple-step-to-grow-wealth.html
Knightscope
Knightscope’s mission is to make the United States of America the safest country in the world.
https://www.knightscope.com/invest
The Knightscope Machine-as-a-Service (MaaS) strategy targets an effective, profitable business model with high recurring revenues at scale with hardware, software, and support components. Our contracts can generate up to $96K per annum providing clients an effective hourly rate of approximately $6 – $12 per hour depending on type of machine and options selected. We target recovering $60K in bill-of-material cost of the robot in year one and we also target $250K estimated profit per robot over targeted life of 5 Years.* Approximately 30% of customers pre-pay full year contract in advance.
Five retirement income planning tips. | New York Life
Save, invest, start early and delay retirement as long as possible are the conventional points of wisdom about retirement planning. But an investor should also consider what their income needs will be in retirement.
Here are some tips to move your thinking from saving for to living in retirement:
THINK INCOME, NOT JUST DOLLARS SAVED.
Instead of focusing on a target number (i.e., “I want to save $500,000 by age 60”), think about income.
- What are your monthly expenses and are you able to cover them?
- Do you plan to downsize? Or would you like to treat yourself to some luxuries in retirement? Do you want travel?
- Do you want to leave a legacy to your family?
- How will your savings fare against inflation?
- REVISIT YOUR INITIAL WITHDRAWAL RATE.
You may start off your retirement with certain needs, but those needs inevitably will change. Make sure you evaluate your withdrawal rate with your financial professional at least annually to make sure you are not drawing too much or too little, and are taking life changes into account.
- TO TAKE OR NOT TO TAKE SOCIAL SECURITY.
Deciding when to take Social Security varies by individual. Conventional wisdom suggests taking Social Security as late as possible, but that may not be the best decision for you, depending on your health, marital, and financial status. A financial professional can help you determine your ideal time.
- TRANSITION YOUR PORTFOLIO FOR RETIREMENT.
Build in time to make necessary changes to your portfolio before you retire. That way you are ready and are not making any unnecessary shifts during retirement. In general, a retirement portfolio is less about growth and more about income.
- PLAN FOR A LONG LIFE.
Life expectancy is on the rise, thanks to advances in health care. This means your money will have to last longer. Consider long-term income vehicles, such as fixed immediate annuities, that provide a steady stream of income for life.
Making sure you have enough income to live comfortably can help ensure that you don’t tarnish your golden years. By using these tips, you can plan today for a better tomorrow.
— Read on www.newyorklife.com/articles/5-retirement-income-planning-tips