“Risk to us is 1) the risk of permanent loss of capital, or 2) the risk of inadequate return.” – Charlie Munger Academic research over the years has told us that investment risk is defined by standard deviation or volatility. The higher the volatility that an investment has, the greater the risk and therefore the…
Investing in Bonds
“The essence of investing is the management of risks, not the management of returns.” – Benjamin Graham When people talk about the market, stocks get all of the attention and headlines. Stocks have historically been one of the highest performing financial assets while also displaying high amounts of volatility. There are also many instances where…
Honest Investment Advice From a Wall Street Professional
“I never blame myself when I’m not hitting. I just blame the bat, and if it keeps up, I change bats. After all, if I know it isn’t my fault that I’m not hitting, how can I get mad at myself?” – Yogi Berra I have spent a lot of time talking up the advantages…
Lessons From Thinking Fast and Slow
“If there is time to reflect, slowing down is likely to be a good idea.” – Daniel Kahneman Thinking Fast and Slow is a fascinating book by Nobel Prize winner Daniel Kahneman. It is full of interesting studies that have been performed over the years to learn how to think about thinking and how we…
How to Lose Money with the Stock Market at All-Time Highs
“When things are going well and prices are high, investors rush to buy, forgetting all prudence. Then when there’s chaos all around and assets are on the bargain counter, they lose all willingness to bear risk and rush to sell. And it will ever be so.” – Howard Marks Stock markets around the globe continue…
Should I Save More in My 401(k)?
“I’ve got all the money I’ll ever need, if I die by four o’clock.” – Henny Youngman Common sense reader mailbag: I would like to increase the percentage of my salary that I put into my 401(k) but I’m nervous with the stock market trading at all-time highs? Should I wait for a pullback in…
How to Invest 100% of Your Portfolio in the Stock Market
Disclaimer: I do not know your risk profile or time horizon as an investor so I cannot possibly gauge your suitability for the investment strategy I am about to discuss. I am simply showing how this can be done for those that determine that they have the time horizon and tolerance to take on the…
How Do You Earn Higher Rates on a Savings Account?
“The return OF capital is more important than the return ON capital.” – Old Investing Proverb A reader asks: I’m getting sick and tired of earning such low interest rates on my savings account. Should I invest in stocks or bonds to get a better return on this money? What are my alternatives if rates…
Why Picking Stocks is Even Harder Than You Think
“Investing is simple, but not easy.” – Warren Buffett There are many factors one has to consider when buying a stock. You must determine the competitive advantage that the company has over its competitors. You must gauge the consistency of their operating history and what the long-term prospects are for the company. It also makes…
How to Create a Disciplined Investment Plan
“With broad asset classes, we want to take advantage of the mathematics of mean reversion. And so when any asset class runs too far ahead, it automatically gets trimmed back. And when it falls too much, it automatically gets bought. It just happens “automatically” through math. Look, we know any individual stock can go to zero. But…
