In my book, Think, Act, and Invest Like Warren Buffett, I noted that the Oracle of Omaha advised investors: “We have long felt that the only value of stock forecasters is to make fortune-tellers look good. Even now, Charlie (Munger) and I continue to believe that short-term market forecasts are poison and should be kept locked up…
One of the more frequently asked questions I get is about the need to diversify across mutual fund or exchange-traded fund providers: Is there risk in having all your eggs in one fund family’s basket? This question became even more prevalent after the Bernie Madoff fraud was exposed. We’ll begin to address this issue by…
The financial equivalent of the Miller Lite, “tastes great, less filling,” debate is between traditional finance (which uses risk theories to explain asset pricing), and the newer behavioral finance field (which uses human behavior to provide the explanations). Unfortunately, there’s no consensus about which side of the debate is correct. My own view is that…
During bear markets, the dividends thrown off by companies provide the cash flow required, while a total-return approach requires one to sell shares to provide the cash flow—a clear advantage of dividend-focused strategies that those who favor them are quick to point out. This blog addresses that issue specifically. We’ll begin our discussion by pointing…
There’s an interesting new paper by Claude Erb, “Has the Stock Market Been Overgrazed?” He begins with noting that over time (since the 1920s), the beta, size and value premiums have all declined. He then asks: “What if too many investors are demanding too much from a possibly limited supply of opportunities?” Said another way,…
The tendency for mutual fund companies to drop poorly performing funds when calculating historical return data is a major problem for unsuspecting investors, and it’s known as survivorship bias. An investor selecting mutual funds today is choosing from a list that excludes the losers that have been either closed or merged out of existence so…
Some things never change. In 1940, Fred Schwed wrote a humorous book called, “Where Are the Customers’ Yachts?” It was about the dichotomy between the lavish lifestyle of those who manage money and the far less glamorous struggles of those whose money is being managed. In 2006, Paul Farrell noted in a MarketWatch blog post that more…
For much of the past decade, I have been on a mission to persuade you to fundamentally change the way you invest. It’s my firmly held view that the road to financial perdition begins with a call to a broker or adviser who claims to be able to “beat the markets.” I am not alone…
Having the privilege of walking through life with people vocationally, aiding in the acquisition, maintenance and dispossession of earthly resources as a financial advisor, I’m burdened with a heightened sense of the battling spirits of scarcity and abundance. The dehumanizing poverty that torments the Majority World screams that resources—here and now—are scarce. Remembering when I handed…
Ten years ago, I tracked every penny of our family’s spending. That’s good, right? Over time, however, I lost sight of why I was doing it and eventually stopped. Recently, I decided to try it again, and I find myself having the same mental conversation every time I sit down with my receipts. “I don’t…
Q: What are the benefits of buying higher coupon bonds? A: A higher coupon or “premium” bond has a higher coupon rate than the current market interest rate and will trade above par. These bonds sell for more than 100 percent of their par value, so the dollar value is greater than the normal $1,000….
by Brad Jenkins Life is hectic. Dealing with jobs, friends, family, and everything else you have on your plate contributes to that rapid pace. When you add children to the mix, it doesn’t get any easier. At some point, we run out of time to accomplish everything on our to-do list. Eventually, every one of…
Today concludes our four-part series on the efficient market hypothesis. While the EMH helps us understand how markets work, in terms of investment strategy it really doesn’t matter whether markets are efficient or not. The only thing that really matters is whether you can exploit inefficiencies persistently, after the expenses of the effort. That has proven to be extremely…
There are many investors who have a hard time accepting the fact that when a company pays a dividend the payment results in a permanent relatively lower price (relative to what the price would have been the dividend had not been paid), not just a lower price on the day it makes the distribution. The problem results…
One of the more persistent investment myths is that the winning strategy is to sell stocks in May and wait to buy back until November. While it is true that stocks have provided greater returns from November through April than they have from May through October, since 1926 there has still been an equity risk…