Warren Buffet once said that “diversification is protection against ignorance. It makes little sense if you know what you are doing.”1 In other words, within the vast universe of stocks and bonds, why buy a grab bag of both winners and losers, if you can identify the winners and just pick those? Mr. Buffet has… Continue reading When Diversification Means You Don’t Know What You’re Doing
Category: Stock Market
Three Reasons to Own International Stocks
“Travel is fatal to prejudice, bigotry, and narrow-mindedness,” wrote Mark Twain in Innocents Abroad, “and many of our people need it sorely on these accounts.”1 You’ve probably met people who have rigidly held views on various nationalities or regions outside our country. They’ve never visited these places, but they can tell you for a fact everything… Continue reading Three Reasons to Own International Stocks
Study Shows That Costly Investment Biases Are More Prevalent In Selling
We are all biased in many ways. Sometimes it’s a good thing, like when we’re predisposed to give family and close friends the benefit of the doubt, sticking up for them when someone else mentions a shortcoming. Sometimes it’s bad, like when a certain brand of car cuts us off in traffic and because we’re… Continue reading Study Shows That Costly Investment Biases Are More Prevalent In Selling
How It Works: The Yield Curve and Bonds
In the past few weeks the media have been talking about an “inverted yield curve” and why it may be an indicator of a coming recession. For example, from USA Today: “One of the most closely watched predictors of a potential recession just yelped even louder.”1 As a well-informed investor who wants to avoid unnecessary losses… Continue reading How It Works: The Yield Curve and Bonds
Active Managers Underperform Index Funds for the Ninth Year In a Row
Because the global stock market is far more complex than anyone can imagine, it’s easy to come up with investing theories that sound entirely reasonable, but simply don’t describe reality. One of those theories is that a fund manager or research team can consistently outperform a benchmark index using stock selection, sector rotation and/or market… Continue reading Active Managers Underperform Index Funds for the Ninth Year In a Row
What Worried Investors Really Want to Know When the Market is in Turmoil
People like to talk about money and investing, at least in general. But when it comes to their own finances, especially where their lack of knowledge might make them look uniformed, they’re much more reticent. During the weeks of market volatility at the end of 2018, Marketwatch was looking for the kinds of questions nervous… Continue reading What Worried Investors Really Want to Know When the Market is in Turmoil
Finding the Causes of Financial Crises: The Human Factor
As a society we place a high priority from learning from our mistakes. Even relatively small-scale disasters are followed up by thorough investigations to determine what caused them. For example, the National Transportation Safety Board investigates every single accident involving a U.S. aircraft.1 One of the costliest disasters in recent history was the market crash of… Continue reading Finding the Causes of Financial Crises: The Human Factor
How Emotions Are Hurting Younger Americans’ Potential Stock Market Gains
You’ve probably heard stories of how living through the Great Depression deeply affected some people. Though they were young at the time, for the rest of their lives they saved food packaging, like pickle jars and plastic bread bag clips, just in case another era of privation was around the corner. While being thrifty and… Continue reading How Emotions Are Hurting Younger Americans’ Potential Stock Market Gains
Deja Vu All Over Again: It’s Prediction Season For The Markets
In March of 2015, Marketwatch columnist Paul Farrell wrote, “It’s time to start the countdown to the crash of 2016. No, this is not a prediction of a minor correction. Plan on a 50% crash.”1 He then cited the major factors that would lead to this market collapse: overvalued tech companies, political turmoil, and the… Continue reading Deja Vu All Over Again: It’s Prediction Season For The Markets
How The Fourth Quarter Of 2018 Puts To Rest The Myth Of A Free Lunch
Last December, if you caught the news at all, you couldn’t help hearing how poorly stocks were doing. For several weeks the volatility seemed to be fulfilling the dire predictions of every market doomsayer. However, it’s one thing to hear about market fluctuations on some distant trading floor and quite another to open your quarterly statement to see the… Continue reading How The Fourth Quarter Of 2018 Puts To Rest The Myth Of A Free Lunch