I shared a statistic in my last post that received a fair amount of questions and scrutiny from readers (see: Playing the Probabilities). Namely, that the worst 30 year total return on the S&P 500 was close to 850%. When investors see a number this large the first reaction for many is disbelief. I’m always…
Playing the Probabilities
The following is one of my favorite running stats on the stock market: Over the years I’ve noticed that whenever these types of long-term numbers are presented there tend to be two extreme responses: See, put your money in stocks, close your eyes and you’ll be fine in a couple decades. Who has a twenty…
How Perception Affects Your Investing Reality
The big “news” this week in social media was that Twitter did away with their ‘favorite’ button and replaced it with a ‘like’ button. This also meant a shift from a star to a heart when you click this function. The Twitter faithful was less than enthusiastic about these changes as you can see from…
10 Questions to Help Define Your Investment Philosophy
There are many different ways to make money in the markets. There’s no one-size-fits-all for every investor. But the ways people lose money are fairly common — chasing past performance, groupthink, overconfidence, loss aversion, fear (of missing out and of being in), looking to get rich in a hurry, taking the markets personally and not admitting…
Howard Marks & Warren Buffett on Paycheck Movie Sequels
I’m a huge fan of the WTF podcast from Marc Maron. Maron has an uncanny ability to get celebrities to open up on both personal and professional matters. In a recent episode he was talking to actor Jason Bateman, who’s one of my favorite comedic actors (Arrested Development, Bad Words, Juno, etc.). Bateman plays the…
Does a Change in Expectations Require a Change in Strategy?
Add John Bogle to the growing list of respected investors — GMO, Research Affiliates, William Bernstein, Ray Dalio, Robert Shiller, Cliff Asness — who believe investors should temper their expectations for future market returns in the coming decade. From a recent interview with Morningstar: So, I think the best thing we can expect–and this is…
The Biggest Difference Between the Real World & Academia
When new investors are just starting out in the markets they’re often told that a paper portfolio is a good way to test out a strategy without putting real money to work. This one sounds good in theory but is fairly useless in practice. The thing is that there are no simulations that can prepare…
How to be a Good Client
Last week I wrote about the importance of goals-based investing and how it can be overlooked by the majority of those in the financial advice-giving business. Much of the blame in that post fell on the shoulders of financial professionals, but financial consumers are not innocent on this issue. One of my readers pointed out to…
Are Private Equity Returns Overstated?
Top quartile private equity performance is something every institutional fund aspires to. Of course, every single PE fund claims to be top quartile, which would seem to be mathematically impossible. David Swensen and his team at Yale have put together one of the most enviable track records in this space. This passage comes from the…
Surviving the Next Downturn
My colleague Josh Brown had an excellent piece in the most recent Fortune Magazine that asked a simple, yet loaded question: Are You Ready for the Next Bear Market? As we’ve seen from the seemingly never-ending market crash predictions over the past few years, no one really knows when the next bear market will hit….
