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Morgan Housel wrote a great piece on why it’s so hard to predict outcomes. Really, it’s about feelings.
How investors feel about stocks five years from now will have a big impact on performance between now and then. If you could semi-accurately predict broader shifts in market mood, you’d do fairly well for yourself. Except, predicting how people will feel in the future is just as hard as predicting everything else about the future. Continue Reading…
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The Little Book that Beats the Market is Joel Greenblatt’s attempt to explain investing to his kids. In that, he succeeds. But it also offers some insights into his simple investing strategy.
If you’ve read any value investing books before, the first half this Little Book will be familiar. Greenblatt understands that investing is not easy. It takes discipline, work, and patience – areas where investors fail – to put up with manic Mr. Market. Greenblatt offers up his Magic Formula to help the cause.
Greenblatt based the concept of his formula off of another investing strategy by Ben Graham. Graham came up with a simple strategy that bought a basket of 20-30 stocks that were cheap enough to meet Graham’s specific requirements, and without doing additional work, the “results would be quite satisfactory”. Continue Reading…
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Amazon released its annual letter to shareholders and Jeff Bezos touched on several reasons for the companies success.
A customer first mentality was one piece of it. Long term focus was another. As was luck. Lastly, there was a willingness to fail more than its competition. Bezos explains:
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Sometimes we’re wrong. We make mistakes. Bad luck happens.
In a discipline like investing, built on estimates and probabilities, it can happen often. And yet, being wrong is something people don’t think about very often.
The most important lesson – of all the lessons – in The Intelligent Investor, is the concept of margin of safety. Continue Reading…
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I don’t own smart beta funds because I don’t believe they fit my strategy.
Instead, I stick with a simple approach, four funds – a US, developed international, emerging markets, and treasury bonds – adjusting the allocation based on valuation. Basically, I move from expensive to cheap and if all equities are expensive then move from expensive to bonds.
That’s the simplified version. Continue Reading…
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Sound investment advice doesn’t change. Neither does investor worries or behavior. It may seem like it’s all new but it’s just being rewritten – slightly differently – over and over again. The books, articles, and stories just cycle along with the markets, where each new environment is an opportunity to update what was said in the past.
Case in point is a 100-year-old book (the link is below) I came across while digging for something else. Curiosity got the best of me – really it was an excuse to avoid work – so I browsed a few pages on investing circa 1917.
It’s always interesting to see how things were explained in the past. I thought I’d share a few century old ideas below: Continue Reading…