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Seth Klarman has been critical of index funds in the past. He’s been equally critical of active funds. It turns out, the behavior of fund managers and investors can work against each other. Career risk, short-termism, optimism, return chasing, and herd mentality can lead managers, investors, and markets astray.
I recently read three articles in which Klarman covered this. Below are some of his thoughts. Continue Reading…
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The wait for next year is over. Congrats Cubs!
The World Series win is the only thing that happened this week, as far as Chicagoans are concerned.
For everyone outside my little bubble, I came across a Buffett interview on Bloomberg that digs into his early years, businesses as a kid, Ben Graham, his investment process, and more. There are some good stories and quips as usual. Continue Reading…
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Investors inevitably become unsatisfied with the status quo. This seems to be an unwritten rule and why the cycle of mistakes keep repeating.
I was reminded of this after reading an article Seth Klarman wrote for Forbes in 1992 that still applies today. Continue Reading…
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The behavior gap is alive and well in Europe. Much like U.S. investors, our European counterparts make similar mistakes.
This shouldn’t be a surprise. Decisions around what fund take its past returns into account. Everyone does it to some degree. We want to make money so we look for funds with a history – however limited – of positive results. The behavior gap is a self inflicted cost of buying a fund after it performs well and selling after it performs poorly. Continue Reading…
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Anytime volatility picks up or the market makes a big move higher or lower, investors should remember that the market sets prices based off of the collective wisdom and stupidity from millions of decisions.
But as is often the case, many investors rely heavily on the direction of prices to decide how they should act (eventually, leading them to look for “expert” opinions or forecasts to confirm their actions).
When price direction alone dictates your actions, then it’s a good time to remind yourself that stocks are not pieces of paper, but pieces of a business. As Graham’s parable of Mr. Market likes to point out, the price being offered on any given day doesn’t always reflect the real value of the business. Continue Reading…
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Everyone wants to know what they can make. “What type of returns can we expect going forward?” gets asked a lot. What follows is a explanation of how cheap or expensive the market is and some educated guess on expected returns over the next several years.
So you end up getting something like this: Continue Reading…