Rational investing for financial independence
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 readingMost traders and investors have heard that you need to sell in May and go away. Is this just a myth or is it correct? Let’s find out by looking at the historical numbers: My data is the S&P 500 index from 1960, downloaded from Yahoo/finance, until end of April 2020. The index doesn’t include dividends and is thus excluding
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Poker, Sex and Dying is the title of a book by Juel Anderson published some time in the early 1980s. Some years after publication it was out of print and somewhat forgotten, but accidentally option investor David Caplan found a copy in a second hand store. He was so impressed by the the content that he purchased the copyrights and
Continue readingThis is a very short article based on two much longer articles: Don’t be fooled by your dividend bias – sell shares to create “income” Dividend investing: Don’t be fooled by your dividend bias – marginal rate of return/incremental return Don’t be fooled by your dividend bias: DRIP is inferior to internal compounding On the 30th of April 2020 Royal
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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). The languages are related and easy to understand between each other,
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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
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Let’s assume you buy Disney at 100 and one year later it trades at 130. A 30% return in one year, isn’t that great! Some time ago I used to cheer when my stocks rose to new highs. It felt great to count the paper profit but as a long-term investor this logic is irrational. Why? Because the only time
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Now is a good time to start a diary Now is a good time to start a diary. It doesn’t have to be long. But there’s a good chance you’ll tell your grandkids about these days. Also remember that it’s hard to un-remember what you know about the past when looking back on it, so it’s good to document your
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I believe it’s important to read, but at the same time being careful what to read. Quality are much better than quantity, and reading twice, in my opinion, is more valuable than reading more. I read The Intelligent Investor for the first time in 2015, and in December 2019 I had the pleasure of rereading the book. In between readings
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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
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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
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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
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Family businesses are all around us: the local pizza-shop on the corner, the auto dealership, the small local newspaper or your web-domain provider. They are all most likely run and owned by the founder or a small group of people – often a family. These owners have a real passion for their business and are not afraid of working outside
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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,
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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
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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
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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 notes are a wonderful resource to revert to later, an even better is having the quotes easy accessible online for later use. Thinking In Bets by Annie Duke is a fantastic book on how to make
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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
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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!
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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
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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
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I reread all of Nassim Nicholas Taleb’s books in October 2019 (except The Bed of Procrustes, which I have not ordered yet). I strongly recommend all his books, both for insights in your “everyday” life or “trading/investment” life. His books have made a huge impact on how I view the world and how I invest. While reading I wrote down
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Crowdfunding/p2p is a relatively new asset class and has increased in popularity over the last five years. To my knowledge the biggest market, UK, at one point had 12% (?) of the lending market served by crowdfunding. But before you dip your toe in the crowdfunding water you should carefully evaluate if this is for you. My advice: be very,
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