Category: Investing

Is Your Broker Safe?

In Street Name Your capital is at risk when you are investing in equity markets, but I assume very few consider the broker as a potential risk. But the fact is that your capital might be at risk if the broker goes bankrupt. Not only your cash deposit, but also your shareholdings. How is this possible? I believe most investors

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Some Thoughts On The Crowdfunding Platform Estateguru

Introduction and summary: I have invested in Estateguru since 2016 and this article shares my thoughts and experiences as a lender/investor. In a previous post I expressed my concerns over crowdfunding and the inherent risks associated with the platforms. Before you continue reading I would recommend reading the article to get a better understanding of why I believe crowdfunding might

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How Can You Best Hedge Against Tail-Risk?

Tail risk is a form of portfolio risk that arises when the possibility that an investment will move more than three standard deviations from the mean is greater than what is shown by a normal distribution. Tail risks include events that have a small probability of occurring, and occur at both ends of a normal distribution curve. –Investopedia Tail-risk: Nassim

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Why Investing Solely For “Income” Is A Mistake

I don’t think you should ever invest for income. It is a mistake…….. You shouldn’t just invest for dividends, you should invest in businesses that reinvest their profits to achieve a future growth rate…..However, I realise that for many investors, the idea of realising part of their capital to provide income is anathema. – Terry Smith, CIO of Fundsmith. I’m

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Future Expected Returns In A Zero Interest Rate Policy (ZIRP) Environment

The last decade has produced fantastic returns in most global asset classes (commodities excluded), helped by enormous interventions by central banks. Can we expect similar high returns in the coming decade? The “new normal” (?): The “new normal” seems to be a low interest policy for the foreseeable future. How do we adapt as investors? Japanese investors have battled with

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The Importance Of Diversification

Harry Markowitz won the Nobel Prize in 1990 for his work in showing mathematically how you can both reduce risk and create better returns by diversifying across regions and assets. Risk is of course measured in volatility, ie. how your assets fluctuate in price. Such a theory was new when it was first released in the 1950s, and Markowitz said

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How Much Can You Pay For A Quality Company And Still Make High Returns?

Introduction and summary: In an article a few weeks back I wrote an article about the logic behind buying shares in quality companies, given that they are trading at fair multiples. Warren Buffett and Charlie Munger are, not surprisingly, correct in saying that it’s far better to buy a wonderful company at a fair price than buying a fair company

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Dollar Cost Averaging: A Simple And Easy Way To Beat The “Experts” And Build Wealth Over Time

Summary and introduction: Research shows that the majority of investors underperform the broad market indices. The most likely reason is due to frequent buying/selling and behavioral mistakes. When you are trying to “outsmart” the markets, you most likely end up losing to the market. To successfully invest you actually need to do as little as possible. What is required of

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Compounding – The Magic Of A Long-Term Mindset And Delayed Gratification

“Compound interest is the eight wonder of the world. He who understands it, earns it….he who doesn’t, pays it” -Albert Einstein Presumably Albert Einstein said the words above, and likewise Benjamin Franklin said that time is money. Unfortunately, we seem to forget these very simple principles when it comes to most decision making – be it learning, investing or in

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Don’t Be Fooled By Your Dividend Bias: DRIP/dividend Is Inferior To Internal Compounding

Introduction and summary: Many investors have a strong focus on dividends, so much that I would like to call it an irrational dividend bias. Dividend investors focus only on dividend stocks, and for the most part ignore those stocks which don’t pay a dividend. Thus, they leave out a huge segment of the market that has the potential of compounding

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Does Valuation Matter? Less Than You Think If You Buy Quality Stocks

Summary: S&P has an estimated P/E of 23 for 2020. Rich valuations sometimes make the best companies’ share price languish. Low interest rates justifies high valuations. Indexers might suffer more from high valuations than active investors. How important are growth and valuations? I look at theoretical returns under different valuations and growth. It turns out Warren Buffett is right: It’s

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Interview: Short-Term Trading Is A Zero-Sum Game, Investing Is Not

This week I was interviewed about my trading philosophy. In the interview I mentioned how difficult it is to make money daytrading or swingtrading for short-term profits. This is mainly a zero-sum game, I will even say it has negative expectancy due to commissions and slippage. Opposite, long-term investing has a positive expected return, given a diversified portfolio, as long

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Dividend Investing: Don’t Be Fooled By Your Dividend Bias – Marginal Rate Of Return/Incremental Return

This article covers these topics: Why dividend investing is not necessarily the most efficient way to compound capital. Dividends are paid out of book value, but usually reinvested above book value. Why accept to receive a dividend at book value when you can for example sell shares at two times book value? Where is the best place for your capital?

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