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Weekend Reads – 4/21/23

April 21, 2023 by Jon

Quote for the Week

Visualize yourself looking back when you’re 80 years old, reviewing whether you invested your money wisely. Ask, “What is it I can trust myself to do in good times and in bad?” Then write it down on one side of a single sheet of paper — when you’ll put money in, how you’ll manage it, when and why you’ll take it out. The best plan, for most of us, is to commit to buying some index funds and do nothing else. Benign neglect is the secret to long-term success.  If you change your investment policy, you are likely to be wrong; if you change it with a sense of urgency, you’re guaranteed to be wrong. — Charles Ellis (source)

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Arthur Zeikel’s Investing Advice

April 20, 2023 by Jon

Good investing rules of thumb are timeless. They’re meant to simplify the complexity of investing and help you avoid mistakes.

That’s not to say that good rules are guarantees. They’re guidelines. There will be exceptions. But they’re meant to work more often than not.

In 1994, Arthur Zeikel shared some rules of his own. He offered some advice to his daughter.

Zeikel had decades of experience running Merrill Lynch’s asset management business. He understood the game. He knew how human nature undermined investing success and how a few simple rules were often all it took to keep people on track.

So he imparted some wisdom on how to manage her portfolio in the hope of avoiding the pain of making similar mistakes herself. A year later, he published his rules to a broader audience and they are still as timeless today. Continue Reading…

Weekend Reads – 4/14/23

April 14, 2023 by Jon

Quote for the Week

Those wonderful statistics on long-term returns are what the market did, not what any single individual or fund did, or would do, if history replayed itself. In my real-world experience, investors with smaller allocations to stocks and with some anchors to windward have been the ones most likely to be the winners over the long haul. The crucial element of success is the ability to make decisions without freezing up or slamming the panic button. In bear markets, the muted volatility and the contractual safety of bonds provide the most congenial environment for arriving at rational decisions about stocks. In bull markets, the balanced portfolio may not make for lively cocktail-party conversation, but with 60 percent in stocks, your wealth will still be participating and growing.

I cannot overemphasize the importance of this last point. Few decisions in life motivated by greed ever have happy outcomes. Unless you are that rarest of birds, someone who is cool under the rapid-fire, high-pressure decision making required to maximize your returns, let others take such risks, and allow your portfolio to plug along at a slower speed. In investing, tortoises tend to win far more often than hares over the turns of the market cycle (and, as we have recently been reminded, markets still do have cycles). — Peter Bernstein (source)

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Value Investing Makes Sense by Jean-Marie Eveillard

April 12, 2023 by

Value Investing Makes Sense book coverBuy the Book: Print

Jean-Marie Eveillard explains why value investing was the reason for his long-term success. From his introduction to Ben Graham to his transition to a Buffett-style approach, he shares the investing principles and experiences that led to a successful career.

The Notes

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Weekend Reads – 4/7/23

April 7, 2023 by Jon

Quote for the Week

After a stock market decline, people may perceive more risk than before when, in fact, the decline may have taken some of the risk out of the market. I haven’t quantified this, but I believe risk perceptions probably move around more than risk preferences do. — Robert Shiller (source)

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2023: Q1 Returns

April 5, 2023 by Jon

The first quarter of 2023 shows how far markets can swing in such a short time. In fact, double-digit moves in a single month are common even for market indexes. But how you react to those moves matters.

Unexpected events in March are a perfect example. Concerns about the health of a bank had a cascading effect. News of depositor withdrawals at Silicon Valley Bank set off further withdrawals, and finally a rush for the exits. The bank failed because depositors panicked.

Of course, that news tanked the bank’s stock, set off rumors of other banks at risk, and the financial sector dropped 14% in two weeks and a 10% loss in March.

The episode is a lesson in itself. People make up markets. A shift in their emotions moves markets. The most important part of investing is keeping your cool when the markets get crazy because emotions often undermine long-term returns.

A note before getting to the 2023 numbers. The asset class, sector, international markets, and emerging market return quilts are up-to-date with the first quarter returns. Hit the links for each one. Continue Reading…

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