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Year: 2017

The Best Way To Manage Investment Risk

The Best Way To Manage Investment Risk

What is the best way to manage risk? There are many different views on this subject. Many wealth managers will tell you that the best way to manage risk is to have a well-diversified equity portfolio. The same can be said for fund managers. Another tactic is to invest across different assets with low correlations. And if you are clever, you can use the same approach used by the worlds largest hedge fund, Bridgewater. Bridgewater’s funds are designed to achieve…

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The Best Investment Ideas Should Be Easy

The Best Investment Ideas Should Be Easy

Following on from my last post (Second-Level Thinking: What Is It And Why You Need It) I wanted to take another look at investing psychology, specifically, the emotional bias associated with investment research. Investment ideas should not require a lot of work Researching a stock is a critical part of the investment process, but if you’re not careful, you’ll end up convincing yourself to buy the stock, rather than buying based on fundamental research. To explain further, I’m going to…

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Second-Level Thinking: What Is It And Why You Need It

Second-Level Thinking: What Is It And Why You Need It

Understanding the numbers is just one part of investing. To be a successful long-term investor, you need not only understand the numbers but also the psychological traits required to be able to capitalise on your analysis. Personally, I believe that understanding psychological drawbacks/benefits of investing is more important than being a numbers person. If you can’t control your emotions, no matter how much work you put into researching an opportunity, it will all be for nothing. Howard Marks, the CEO, and founder…

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Income Investing With Low Payout Ratios

Income Investing With Low Payout Ratios

Dividends are the bread and butter of investing. If you don’t have dividend stocks in your portfolio, you’re holding yourself back. According to credit rating agency Standard and Poor’s, over the last 80 years dividends have been responsible for 44% of S&P 500 returns. Between 1929 and 2012,  2012, an investment in the S&P 500 would have returned 5.2% per annum excluding income but 9.4% including dividend distributions. When you compound the additional 4.2% of extra returns over the long term,…

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Seth Klarman’s Value Advice

Seth Klarman’s Value Advice

Seth Klarman is one of the best value investors of all time. He founded his Boston based hedge fund Baupost in 1983 and since inception, the fund has produced returns of around 20% per annum for investors despite the fact that its cash weighting frequently exceeds 30%. See also: Warren Buffett Describes How To Pick Stocks Klarman’s book on value investing, Margin of Saftey has been out of print for many years, but demand from investors seeking to learn from his…

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Don’t mistake a lack of volatility for low risk

Don’t mistake a lack of volatility for low risk

“Beta is a more or less useful measure of past price fluctuations of common stocks. What bothers me is that authorities now equate the beta idea with the concept of risk. Price variability yes; risk no. Real investment risk is measured not by the percent that a stock may decline in price in relation to the general market in a given period, but by the danger of a loss of quality and earnings power through economic changes or deterioration in…

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How to Invest the Lazy Way and Beat the Average Investor

How to Invest the Lazy Way and Beat the Average Investor

As I covered in my post on diversification last week, data shows that the chance of finding a long-term winning stock is only around 7%. With this being the case, it makes sense for most investors to hold a selection of tracker funds in their portfolios, rather than trying to beat the market by picking stocks. As the odds are heavily stacked against you, what’s the point of putting in the extra time and effort to find winning equities? Warren…

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Why You Need To Diversify: The Chance Of Finding A Winning Stock Is Just 7%

Why You Need To Diversify: The Chance Of Finding A Winning Stock Is Just 7%

  Investing can be a great way to make your money work harder for you. Over the past 100 years, US and UK equities have returned around 7% to 9% per annum. £100 a month invested at 9% per year will grow to approximately £1.2 million over five decades. However, most investors fail even to make market average returns because it’s so difficult to pick stocks. How to make the most of your skills The world’s best investors have made…

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Warren Buffett Describes How To Pick Stocks

Warren Buffett Describes How To Pick Stocks

Warren Buffett is the greatest investor alive today. After starting with a strategy based on value investing, Buffett’s investing has developed over the years to a more quality-based style, a change that’s produced huge returns for both himself and investors of Berkshire Hathaway. Buffett wasn’t born with all of his investment acumen. Over the years his strategy has developed and changed with experience into what it is today. “In my early days as a manager I, too, dated a few…

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The Simple Guide To Boring Money

The Simple Guide To Boring Money

Money might seem daunting at first, but it does not have to be. Managing your money, saving, planning a budget, organising a pension scheme and making sure you don’t get yourself into money trouble is easy if you have the right tools. And to help you develop the right tools, The Simple Guide To Boring Money has all the information you need. The truth is; money is boring. There’s no other way of putting it. However, that’s just the way…

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