Compounding investing wisdom...
Investors inevitably become unsatisfied with the status quo. This seems to be an unwritten rule and why the cycle of mistakes keep repeating.
I was reminded of this after reading an article Seth Klarman wrote for Forbes in 1992 that still applies today. Continue Reading…
The behavior gap is alive and well in Europe. Much like U.S. investors, our European counterparts make similar mistakes.
This shouldn’t be a surprise. Decisions around what fund take its past returns into account. Everyone does it to some degree. We want to make money so we look for funds with a history – however limited – of positive results. The behavior gap is a self inflicted cost of buying a fund after it performs well and selling after it performs poorly. Continue Reading…
Anytime volatility picks up or the market makes a big move higher or lower, investors should remember that the market sets prices based off of the collective wisdom and stupidity from millions of decisions.
But as is often the case, many investors rely heavily on the direction of prices to decide how they should act (eventually, leading them to look for “expert” opinions or forecasts to confirm their actions).
When price direction alone dictates your actions, then it’s a good time to remind yourself that stocks are not pieces of paper, but pieces of a business. As Graham’s parable of Mr. Market likes to point out, the price being offered on any given day doesn’t always reflect the real value of the business. Continue Reading…
Everyone wants to know what they can make. “What type of returns can we expect going forward?” gets asked a lot. What follows is a explanation of how cheap or expensive the market is and some educated guess on expected returns over the next several years.
So you end up getting something like this: Continue Reading…
People often confuse investing and gambling but the parallels actually run deep. The confusion lies in comparing most forms of gambling – slot machines, roulette, lotteries – where the house sets the odds with those where the players set the odds. The house sets the odds in its favor. The house – not you – is guaranteed to win the longer you play.
Unlike most forms of gambling, horse racing odds are set by the betting public. The odds change based on where the money flows. In that context, understanding horse racing might offer some insights into investing, which is where this post is heading. Continue Reading…
One thing Howard Marks does well is take the prevailing market view and flip it on its head. You can see it in a couple interviews he did in late September. Both interviews are brief and there is some overlap in topics, so I’m just going to pull out a few highlights.
Here’s his response to a question about how low yields and high multiples make this market extremely risky: Continue Reading…