Novel Investor • Page 8 of 13 • Compounding investing wisdom...

Happy Hour: Disclaimer Makeover

July 14, 2017

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Jon

It’s an absolute certainty that anytime a portion of the market performs well, a new fund is created for it. It’s like clockwork.

There will always be a market for this stuff because the past returns look great and people love a good history of returns (no matter how short). Of course, I could argue it’s a contrarian indicator to stay away because the good returns were already made.

Now, ETFs make it even easier for the industry to mass produce these fad funds to take advantage of the latest hype. Case in point is the latest ETF creation for the FANGs – Facebook, Amazon, Netflix, Google, along with a few similar high performers.

All these new funds do is add to the confusion in fund land. Continue Reading…
Seth Klarman on Risk Aversion

July 12, 2017

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Jon

One of the principles of Seth Klarman’s investment strategy is risk aversion. He’s not alone. Buffett uses it, who learned it from Ben Graham, along with several others because they place capital preservation above high returns.

In a paradoxical sort of way, Klarman has achieved higher returns, while focused on preserving capital, as a result of his highly disciplined strategy. That, of course, does not mean high returns are guaranteed. Rather, it only means that there’s a higher chance of avoiding big losses when you manage for risk.

During an MBA lecture, Seth Klarman gave his take on risk aversion: Continue Reading…
Happy Hour: Bridge Experts

July 7, 2017

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Jon

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…
Total Returns for First Half of 2017

July 5, 2017

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Jon

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…
Ben Graham on Investing, Speculating, and Thinking in Probabilities

June 28, 2017

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Jon

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…
Happy Hour: Actively Passive EM Funds

June 23, 2017

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Jon

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…

Happy Hour: Disclaimer Makeover

Seth Klarman on Risk Aversion

Happy Hour: Bridge Experts

Total Returns for First Half of 2017

Ben Graham on Investing, Speculating, and Thinking in Probabilities

Happy Hour: Actively Passive EM Funds