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A short post for a short holiday week. So here are two excerpts from a short article where Ben Graham describes the game of investing.
The first is Graham’s definition of value investing and how he views the future. The second is a reference I see often comparing Wall Street to a tournament of bridge players. Continue Reading…
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Global markets did well for the fist half of 2017. Of all the emerging and developed markets tracked by MSCI, only 3 ended the first six months of 2017 in the red. You had to try really hard to lose money in the past six months. In turn, it’s markets like these that can make people think they’re smarter than they really are.
I thought I’d try something different than the past six month updates. Usually, I post the updated charts – asset class, S&P sector, international, and emerging markets – with added context (click the link for interactive charts or grab a download here), but it leaves out about half the data I collect. This time I’m including all of it in one table ranked by total return.
A few quick comments about the data: Continue Reading…
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Ben Graham believed in separating investing from speculation. But he also separated speculation from intelligent speculation because some amount of speculation always exists in prices. The reason: the future is uncertain.
Because the future is uncertain, the market is the collective best guess on what will happen next. But Graham knew that Mr. Market sometimes guesses wrong. Therein lies the opportunity for investors willing to focus on facts in a way that puts the odds in their favor.
I’ve highlighted pieces of a Ben Graham lecture the past couple weeks. In his last lesson, Graham offers a framework for thinking about investing, intelligent speculation, diversification, and probabilities that are worth reading. Continue Reading…
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If you knew what goes on behind the scenes of an index you’d understand why the “passive” label misrepresents index funds. Most indexes are actively managed, meaning the index fund counterpart is too.
I’ve highlighted this in the past with the S&P 500 and MSCI’s indexes. S&P adds and removes stocks from the index every year. So the S&P 500 today looks different than it did ten years ago. It’ll look different 10 years from now.
MSCI reviews and reclassifies countries often (the reviews are an annual event). So countries get moved from frontier to emerging market or emerging market to developed market indexes or vice versa (stocks are added to and removed from each index as well).
Continue Reading…
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The market is a giant mass of people all trying to guess what’s going to happen next. Because of that investors set an expectation for the future of a company or the market based on past results and how they feel that day.
There’s just one slight problem. Even if you guess the expectations right, there’s no guarantee the market will agree with you. You have to guess the price right too. Ben Graham explained that problem in the lectures I referenced last week.
That’s why patience and discipline are so important in investing. But once you understand market psychology and its tendency to fluctuate, you can start to use that to your advantage. Continue Reading…
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The latest from Michael Mauboussin at Credit Suisse was released this week. The report digs into the important question of how the rise of index funds are impacting the market.
About 39% of AUM (and growing) currently sits in index funds and ETFs. But there is a point where that becomes a problem. Everyone can’t index because then nobody is buying based on fundamentals. So at what level does the balance between active and passive investing lead to an unhealthy market?
Well, Mauboussin and crew, think they have a way to measure it. Or, at least, measure the opportunity in the market, assuming you find an active manager with the skillset to take advantage of it. Continue Reading…