Category: Investing

Don’t Be Fooled By Your Dividend Bias: DRIP 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

Continue reading

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

Continue reading

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

Continue reading

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?

Continue reading

Why The Nordic Stock Markets Have Outperformed The Global Markets

The Nordic/Scandinavian region gets lots of coverage for their welfare models and statistical happiness, but perhaps lesser known is that its stock markets have performed really well over the last 50 years. I define the Nordics as Norway, Sweden, Denmark, Finland and Iceland (Scandinavia is Norway, Sweden and Denmark – due to its similar language, Finland’s is not related). The

Continue reading

Sin Stocks And Performance

A certain group of stocks have outperformed the rest of the stock market by a wide margin: Sin stocks. Tobacco, alcohol, arms producers, the gambling industry, the cannabis industry and sex-industry can safely be labelled as sin stocks. In the US, tobacco stocks have been the best performers over the last century, while alcohol stocks have been the best performer

Continue reading

Estimated Future Returns

As of writing most stock market around the globe are down around 30%. That is a big decline, especially considering it happened in just three weeks. However, unless you are about to sell assets today or in the very near future, for whatever reasons, you should consider the drop as an opportunity to add to your holdings. No doubt the

Continue reading

A Leveraged, Capital Intensive, Competitive and Cyclical Business Is Fragile (Some Thoughts On Fragility Vs. Antifragility)

Fragile – handle with care: Fragile is defined as an object easily broken or damaged. When you order something online that is fragile it most likely is labelled as “handle with care”. The reason is pretty obvious: it can’t sustain shocks, knocks, beating or being dropped to the ground.  It easily breaks apart. The opposite is antifragile: Antifragile – do

Continue reading

Don’t Be Fooled By Your Dividend Bias – Sell Shares To Get “Income”

Introduction and summary: My idea with this article is to show that dividends are simply return of shareholders’ capital (a partial liquidation), exactly the same as selling the equivalent number of shares to create “income”. Admittedly, selling shares to support consumption feels a little like sawing off the branch I’m sitting on. Strangely enough, why doesn’t it feel the same about a

Continue reading

The Perils of Selling Short

I signed my first client and proceeded to short my first stock. It almost proved to be my last. Over the next few weeks, I watched the stock trade up to 20, then 30, then 40, finally breaking through 50…..But when the stock climbed past 50, I started to cover, unable to stand the pain. It was too late, however,

Continue reading

Taxes And Compounding

To shelter your savings from taxation while building your nest egg is extremely important. I believe this is pretty obvious for most investors, but I suspect it’s still neglected because the headwind takes about ten years to really make a difference. Unless you have a tax-sheltered account you will take a beating whenever you receive a dividend or sell a

Continue reading

Famous Quotes By Warren Buffett

I believe Buffet’s annual letters are an invaluable source of investment knowledge. I recently reread all of them, in addition to rereading Lawrence Cunningham’s The Essays Of Warren Buffett – Lessons For Investors And Managers, a book containing excerpts from all the annual letters.  I have read the annual letters a few times, but I keep rereading them  at 2-3

Continue reading

Stocks, Investing, Real Estate, Charlie Munger And Inverse Thinking

Charlie Munger likes to think inversely. Inverse thinking simply means focusing on the things you don’t want to happen. Munger didn’t invent this concept, but he has made it immensely popular. While Munger turns the question on its head, he touches upon a very important aspect: how to avoid mistakes. Why does inverse thinking help? Munger says inverse thinking avoids

Continue reading

Should You Trade Or Invest?

I sometimes receive e-mails from potential traders that want to get “rich” trading. I tell them to instead consider investing their capital for long-term appreciation, preferably via passive or active mutual funds. This is why: The chart shows 10 000 invested annually for 30 years with 9% return: after 30 years you have almost 1.4 million in assets. Not bad!

Continue reading

My Favorite Quotes from Atul Gawande’s The Checklist Manifesto

Some weeks ago I published an article about what investors and traders can learn from Atul Gawande’s The Checklist Manifesto. I like to take notes when I read (see my notes  on the pic to the left, excuse my eight-year old handwriting). I believe this is a fantastic resource to revert to later. Better, though, is reading a good book

Continue reading

What Investors And Traders Can Learn From Atul Gawande’s The Checklist Manifesto

This weekend I reread The Checklist Manifesto, a book published in 2010, which argues the case for a systematic approach to our daily work as professionals. Below you find arguments for why I believe a checklist should be a part of the toolkit of any aspiring speculator or investor. Both Charlie Munger and Warren Buffett use checklists. Buffett has a

Continue reading