Investing Strategy

  • 28 Jun
    The 3 Rules To Achieving 10% (Or Higher) Yearly Returns

    The 3 Rules To Achieving 10% (Or Higher) Yearly Returns

    • Achieving 10% per years is pretty simple, just follow three rules.
    • Many forget to include risk in the 10% expected return puzzle.
    • However, if you do your homework, yearly dividend yields of above 60% shouldn’t be excluded. An example will be provided.

    Introduction

    I always talk about how the S&P 500 is overvalued and how everybody should achieve returns of more than 10% per year.

    In fact, I strongly believe that anyone is easily capable of achieving such returns. To achieve returns, say, in the higher teens, you’d need to be a very good investor or have someone telling you what stocks to buy and when. But that puts us in the Buffett, Soros, Klarman, and Dalio category, so we’ll stick with the easy today and discuss how to achieve returns of above 10% per year. More →

  • 27 Jun
    How To Spot A Bargain

    How To Spot A Bargain

    • Some countries are three times cheaper than the S&P 500 while one is five times cheaper.
    • I’ll describe an earnings exercise that helps in discovering bargains and give a hint on a few sectors to look at.
    • It would take the S&P 500 31 year of constant earnings growth at 5% to reach Kroger’s cumulative earnings if Kroger’s earnings just stay flat.

    Introduction

    As you probably know, the S&P 500 and many other indexes are extremely expensive. The cyclically adjusted price earnings (CAPE) ratio for the S&P 500 is 29.87, which is just about to pass the 1929 peak CAPE ratio. However, the situation isn’t much better around the world. The German stock index has a CAPE ratio of 19.6, the Dutch index 21.6, Australia 17.5, India 20.3, and Japan 24.9. These CAPE ratios of around 20 mean that you can expect investment returns of around 5% or lower in the long term.

    I find any kind of stock market return below 10% a crazy investment because the risk of owning stocks is simply too high for anything less than 10%. You might wonder where you can find double digit investment returns. Well, this is what I’m going to share in this article. More →

  • 26 Jun
    Don’t Follow The Herd: Why The Majority Of Investors Always Get It Wrong

    Don’t Follow The Herd: Why The Majority Of Investors Always Get It Wrong

    • Consider this, the question always remains the same: “What will my return on investment be?” But the answer changes all the time.
    • Thinking costs energy and humans prefer to let others do the thinking for them. Are you like that?
    • It’s important to know when to use history as a teacher.

    Introduction

    “Whenever you find yourself on the side of the majority, it is time to pause and reflect.” 

    – Mark Twain

    When Albert Einstein was teaching at Oxford University, he gave his senior physics students exactly the same exam he had given them the year before. His assistant was disturbed by such a mistake, but before intervening he asked Einstein whether he actually made a mistake. Einstein replied that the exam was exactly the same. The assistant was even more concerned and asked why he would do such a thing. Einstein replied, “Well, the questions are still the same, but the answers have changed.” More →

  • 21 Jun
    Diversification vs. Concentration

    Diversification vs. Concentration

    • Index funds and diversification have worked extremely well in the past 35 years, however their success can be thanked to geography, as we hear only about the success in the U.S., and to declining interest rates.
    • If the S&P 500 had the same earnings yield as when the Vanguard fund gained traction, it would be at 557 points, yes 77% below current levels.
    • It’s better to wait in cash than buy a diversified index fund now.

    Introduction

    Some investment gurus advocate spreading your portfolio across various asset classes in order to limit your risks for the same return. On the other hand, others say diversification is for idiots and for those who don’t know what they’re doing. I’ll analyze their arguments and see what the best option is for you. More →

  • 14 Jun
    Step-By-Step Guide To Building An All-Weather Portfolio In Today’s Environment

    Step-By-Step Guide To Building An All-Weather Portfolio In Today’s Environment

    • I’ll explain what an all-weather portfolio is and why it’s important to think all-weather in this macro environment.
    • It’s important to understand the difference between portfolio asset class diversification and risk diversification.
    • I’ll use imaginary risk calculations to illustrate how to properly build an all-weather portfolio.

    Introduction

    History has taught us that we always have to expect the unexpected. For example, I don’t know whether the U.S. economy is going to continue to expand or whether interest rates will be lower or higher in the future. I can make estimations, account for probabilities, and then invest accordingly, but still, I have to be prepared for anything. More →

  • 13 Jun
    Margin Of Safety – Seth Klarman’s 10 Rules For Investing Success

    Margin Of Safety – Seth Klarman’s 10 Rules For Investing Success

    • After summarizing Seth Klarman’s book, I thought added value could be created by listing his most important investing rules.
    • Some rules are easy to understand and apply, while some go against what the majority thinks. Think averaging down.
    • Klarman achieved returns of over 20% for more than 35 years. Therefore, it’s extremely important to learn and listen when he says something as he doesn’t speak much.

    Introduction

    We have completed the chapter by chapter summary of Seth Klarman’s book, Margin of Safety. Click here to view all of these articles on the Investiv Daily website.

    As I find Klarman’s investment style so powerful and yet so simple, I thought it would be a good idea to conclude the summary of his book with 10 of his investment rules. You may want to bookmark today’s article to compare future investment ideas and opportunities against Klarman’s view on investing. More →

  • 12 Jun
    Stocks, Bonds, & Gold, Oh My! What’s The Safest Asset Class Today?

    Stocks, Bonds, & Gold, Oh My! What’s The Safest Asset Class Today?

    • In his search for safety, the average investor usually does it all wrong.
    • Stocks, bonds, real estate, gold, and cash will all probably drop more than 70% once in your lifetime.
    • However, there is an asset class that is much safer and will lead to huge returns, Buffett would call it a “bet on America.”

    Introduction

    When I talk to people that aren’t as obsessed about investments as I am, a word that I constantly hear is “safety.” Everybody wants to do something with their capital without risk and they are in a constant inner fight related to their money and what to do with it. More →

  • 08 Jun
    How To Invest For Your Children Or Grandchildren

    How To Invest For Your Children Or Grandchildren

    • Whether investing for children or retirement, the goal is to maximize portfolio value at a specific future date, not now or in the next six months.
    • Be wary of fees as they eat up a huge part of your future wealth. I’ll show how to avoid them.
    • Temporal diversification and buying companies that create value will do wonders over time.

    Introduction

    Our greatest treasure is, of course, our kids. I’m a proud father for six months now and I must say that every day since my child was born has been the most beautiful day of my life.

    In that spirit, I want to provide the best possible environment for my kid to grow up, but also to enable him to do everything he wants when he is older. This has me, and probably many other parents or grandparents, already thinking about college tuition money, start-up capital for a business venture, helping with the down payment for a house, or simply paying for a wedding or a honey-moon. The notion that you can build a substantial nest-egg with small monthly payments is very attractive to me and will also provide a great educational experience to my kid as it will show him how small actions over a long period of time can bring huge results. More →

  • 07 Jun
    Do You Have a Deterministic Or Probabilistic Approach To Investing?

    Do You Have a Deterministic Or Probabilistic Approach To Investing?

    Introduction

    The human mind is wired in a deterministic way. A proposition is either necessarily true or it is false.

    For example, you either like a person or you don’t. There isn’t an in-between where you would say that there is a 67% probability you like someone. The same principle applies to investing, we either think the market or a stock are going to go up or down. What very few can do is to think in a probabilistic way. But mastering a probabilistic way of thinking would do wonders for your portfolio.

    Today I’ll quickly analyze Apple (Nasdaq: AAPL) as both a strong bullish and a strong bearish case can be made to explain the probabilistic and deterministic approach to investing. More →

  • 06 Jun
    The Truth No One Tells You: Low Risk = High Reward, High Risk = Low Reward

    The Truth No One Tells You: Low Risk = High Reward, High Risk = Low Reward

    • When you give fundamentals time, you really can reach high returns with low risk.
    • Look for earnings stability and earnings yield to calculate your future returns. The lower the price, the higher the earnings yield and the lower the risk.
    • If you’re happy with a 4% return in the next 30 years, the S&P 500 has almost no risk at all. If you want more, keep reading.

    Introduction

    Yesterday we discussed a bit how defensive investors should position themselves in today’s market. As promised, today I’ll debunk the idea that only high risk can lead to high returns. More →

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