Rational investing for financial independence
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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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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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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