Diversification

  • 21 Feb
    Buffett Put $12 Billion On Stocks, But He Didn’t Buy Into <i>This</i> Market

    Buffett Put $12 Billion On Stocks, But He Didn’t Buy Into This Market

    • Stocks grew on positive sentiment after Buffett disclosed his optimism and spent $12 billion.
    • His purchases included Apple, and an extremely cheap sector.
    • Passive investing without thinking is what allows for such heterogeneity in valuations. For investors like Buffett, it’s easy money.

    Introduction

    At the end of January, market bulls rejoiced when Warren Buffet disclosed in a Charlie Rose interview that he had bought $12 billion of stocks since Trump’s election. Since then, the market has jumped another 3% on positive sentiment as even the greatest low risk investors of them all is buying into this market.

    A few days ago, however, Berkshire Hathaway disclosed—in their obligatory holding statement—what Buffett actually bought. This, of course, hasn’t been as publicized as has the fact that he bought $12 billion of stocks, but as always, journalists prefer to focus more on what’s sexy than on what’s important.

    Let’s see if we can learn something from what the Oracle of Omaha has been buying in this market which is constantly breaching all-time highs. More →

  • 02 Oct
    Sunday Edition: Diversification or Accumulation?

    Sunday Edition: Diversification or Accumulation?

    Joel Greenblatt, in my opinion, is one of the greatest value investors of all time. 

    One thing that sets him apart from many other investors is his willingness to concentrate on a handful of deeply undervalued companies rather than diminish his returns through over diversification, or as Warren Buffett once said “diworsification.

    So how many stocks is the right amount to own to be diversified enough, yet not diminish your potential returns? More →

  • 19 Sep
    Beware The House Of Cards

    Beware The House Of Cards

    • Stocks and bonds don’t provide diversification, while gold only does sometimes.
    • Alternative assets are better, but not all of them are equal.
    • Hedge funds perform well in bear markets but heavily underperform in bull markets.

    Introduction

    The increased market volatility after the quiet summer demonstrates how risky markets can be. The market falling by 2.5% in a few days on practically no news except for an increased probability of a small increase in in interest rates and no additional stimulus in Europe is a sign of the market’s fragility. More →

  • 14 Sep
    Diversify Like The Big Boys Do

    Diversify Like The Big Boys Do

    • Temporal diversification diversifies your portfolio through time by buying only the assets that are cheap at the moment and avoiding the ones in a bubble.
    • By buying in cycle troughs you enjoy high-dividend yields that allow you to buy other assets that are in temporal distress.
    • This high yield lowers the need to sell and lowers your tax bill.

    Introduction

    Today we’ll introduce you to a new concept—“temporal diversification,” a term that has begun to gain traction, especially in academic circles—that isn’t yet common knowledge but is already being used by the best investors. Using the example of Berkshire Hathaway, we’ll provide an overview of the concept of temporal diversification and will provide some ideas for increasing your returns by diversifying your portfolio not just for the current moment, but for your whole investing life. More →

  • 13 Sep
    What To Expect From The Markets Now

    What To Expect From The Markets Now

    • The German bond’s 3% loss on a 12 basis point yield move shows how risky bonds are right now.
    • The value of the S&P 500 should be around 1,600 but could go lower with bad economic news.
    • Bonds and stocks seem very risky as they both have low yields and large downsides.

    Introduction

    Last Friday was a pretty scary day in the financial markets. The S&P 500 lost 2.45% and bonds also lost ground due to higher yields.

    Stocks and bonds are correlated and don’t provide quality diversification. We have been warning about the risks inherent to bond investing for a while with warnings that the low yields mean high risk and low returns. More →

  • 06 Jul
    How Diversified Should You Be?

    How Diversified Should You Be?

    • Extreme diversification is good but only provides ordinary results results.
    • Concentrated portfolios proved better in some cases as they allow investors to select the best companies.

    Introduction

    A few days ago we discussed passive and active strategies given that there is a looming risk of a recession and that the markets are unable to break new highs which makes just holding stocks for the sake of holding stocks very risky. In this article we are going to discuss how diversified a portfolio should be as it is easier to pursue an active strategy with a concentrated portfolio of stocks. More →

  • 24 Jun
    How to Prepare Your Portfolio For The Next Recession or Stock Market Crash

    How to Prepare Your Portfolio For The Next Recession or Stock Market Crash

    • The risks of a slowdown are higher than the upside.
    • Fundamental trends are negative in advanced economies while emerging markets show higher growth rates and are cheaper.
    • It is important to create a diversified portfolio with uncorrelated assets.

    Introduction

    In an environment where it seems maximum potential for the U.S. economy has been reached, the St. Louis FED chief, James Bullard, has said in his most recent report that he favors only one interest rate increase through 2018, which would at best keep things stable. His view is further supported by the fact that the unemployment rate is sitting at below 5%, and the Personal Consumption Expenditures PCE inflation—measured by the Dallas FED—is at 1.84%, both of which signal that the economy has reached its maximum potential. More →

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