Novel Investor

Compounding investing wisdom...

Some Perspective On One-Day Market Losses

by Jon

I spent some time Monday morning watching reactions to the stock market. Thanks to social media, everyone has a front row seat to the greatest sideshow on Earth – investor behavior. Monday did not disappoint.

I have two Twitter accounts, one for the site where I follow a wide range of financial types (broken into groups: top finance, financial advisors, value investors, and financial media. BTW, value investors were the most calm – well done!) and a personal account that follows non-finance folks. Continue Reading…

Happy Hour: Fantasy or Reality

by Jon

Football is a few weeks away. For fantasy football fans, that means drafts are starting soon. I thought I’d go slightly off topic, though not really because investing and fantasy sports tend to have similar patterns of behavior.

Put another way, similar mistakes and biases abound in both. So we can take what we know from investing and apply it to fantasy football or vice versa. In either case, hopefully, this post gives you something to think about while you prepare for both. Continue Reading…

Happy Hour: Thinking Ahead

by Jon

The drivers of total return are dividends and changes in price. Dividends are driven by fundamentals. Price is driven by fundamentals and sentiment.

Fundamentals are the basic measures of business – the growth or decline in revenues, profit margins, earnings, etc. Fundamentals drive long-term returns.

The short-term driver is investor sentiment. By sentiment, I mean investors willingness to pay more or less for current fundamentals. Continue Reading…

A Few Things I Believe

by Jon

Everyone has their opinions and beliefs. Some are based on facts. Others are based on some aberration of our mind.

Investing is full of facts. The relentless stream of data can be used to argue anything. And it’s used to support every opinion possible because facts can say whatever you want them to say.

Your job and mine is to come to some consensus about what to believe or not. Below, I’ve laid out some of my own beliefs developed over the years. You can decide which is more opinion than fact.

Continue Reading…

Building a New Investment Process

by Jon

Investing has a few basic truths we should accept: strategies require time and human nature often acts against our best interests.

Time is a dual problem – time required to do the work and time for the strategy to work. I’m dealing with the former which is the point of this post.

I’ve flirted with the idea of changing strategies over the past year. A lack of time gives me the excuse to move forward. Continue Reading…

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