Alpha, n. Luck – Jason Zweig, The Devil’s Financial Dictionary Professional investors are in constant search of the ever elusive alpha. Teams of MBAs, PhDs and CFAs scours every corner of the financial markets looking to outperform. This pursuit of outperformance, after accounting for the risk taken and fees paid, is extremely difficult. For many…

It’s easy to get bogged down in pointing out human foibles when studying the markets because investor psychology and emotions play such a large role in shaping the people’s decisions. Your brain is constantly playing tricks on you, but the brain is also one of the most impressive machines on the planet. It can do…

Tesla is one of the hottest company in years. Pre-orders for the new Model 3 electric car are now over 325,000…for a car that won’t be released until late-2017 at the earliest. Elon Musk is a bonafide celebrity at this point. He followed up Tesla’s shocking numbers by landing a SpaceX rocket on a floating…

As U.S. stocks and valuations have continued to move higher throughout this latest cycle there has been a growing chorus of intelligent industry observers — beyond the usual fear-mongering perma-bears — who are predicting lower stock market returns in the coming years or even decades for the stock market. The combination of higher prices, higher…

In a paper written for the Journal of Portfolio Management called The Myth of Risk Attitudes, psychologist Daniel Kahneman explains why human nature makes it so difficult to succeed as an investor: A central claim of prospect theory is that people are not consistently risk averse. Yes, they are much more sensitive to losses than to gains. But…

Finance can be a very backwards industry. I understand why so many people outside the world of finance don’t understand what it is that goes on in our industry because many of the things that people believe or do just don’t make any sense. Here are ten of them: 1. People in finance believe that when…

Napoleon Bonaparte is widely recognized as one of the greatest war strategists and commanders in history. One of the most fascinating aspects of his wartime strategy involves something that is now referred to as Napoleon’s Corporal. The story goes that during the battle planning stages Napoleon would have one of his lowly corporals shine his…

Investors are worried about stock buybacks. The following comes from a recent Bloomberg piece: Chief executive officers, who just announced the biggest round of monthly repurchases ever, executed about $550 billion of buybacks last year, according to data compiled by S&P Dow Jones Indices. That compares with a net $85 billion of deposits by customers…

As I stated last week, ETFs are a wonderful product innovation for the individual investor. However, most people don’t realize that ETFs were actually created for institutional investors. Those who are worried about passive investing taking over the markets point to the $3 trillion or so in ETFs as their main point of contention. In The…

One of my favorite books from last year was Judd Apatow’s Sick in the Head: Conversations About Life and Comedy. I was recently going through all of my Kindle highlights (a very useful feature of reading on a Kindle) and noticed that I had done quite a bit of highlighting in this book. Most of it had nothing…