Investing Strategy

  • 17 Jul
    How The Economic Machine Works & Why You Need To Prepare Your Portfolio For It

    How The Economic Machine Works & Why You Need To Prepare Your Portfolio For It

    • Productivity growth is the long-term key, make sure your portfolio follows it.
    • The global distribution of wealth is shifting very quickly.
    • Preparing your portfolio for what’s going to happen doesn’t even cost that much. On the contrary, it is even more profitable.

    Introduction

    Ray Dalio is famous for many things. One of them is his explanation of how the economic machine works where he describes how productivity growth, the long-term debt cycle, and the short-term debt cycle affect an economy.

    Today, I’ll briefly summarize his findings as they are reported in a 300-page document and, most importantly, see how Dalio’s economic philosophy can affect our investing strategies. More →

  • 07 Jul
    What We Can Learn From Seth Klarman’s Current Portfolio

    What We Can Learn From Seth Klarman’s Current Portfolio

    • You might call them boring businesses, but with a bit of portfolio rebalancing and buying more on the dips, Klarman’s positions will probably deliver his required 20% return per year over the long term.
    • In the U.S., he is overweigh LNG, refineries, communications, and pharma.
    • A few investing lessons can be derived from his current portfolio.

    Introduction

    As much as I hate bureaucracy and filing required market regulator forms and various statistical Central Bank inquiries, I must say that I love when others do it as I can get a pretty tasty free lunch from it.

    You probably know that an institutional fund manager has to disclose their U.S. portfolio positions in a 13F form no longer than 45 days after the end of the quarter with some exceptions. For example, when the manager thinks that disclosure would significantly affect share price, they can postpone disclosing, but we can get a pretty good picture of the things a specific fund is doing. More →

  • 05 Jul
    Where The Growth Is: How To Invest In Emerging Markets

    Where The Growth Is: How To Invest In Emerging Markets

    • Emerging markets haven’t been the best investment in the last 10 years, but economic developments met expectations.
    • Long term analysis shows that emerging markets have just started to develop and the fundamentals are extremely cheap for the expected growth.
    • Each emerging market is different and one has to individually analyze political, currency, demographic, natural, and other risks in order to make proper investment decisions.

    Introduction

    There is a huge difference between short-term and long-term effects on financial markets.

    In the short term, anything can happen and sentiment is what mostly drives short term trends. If we take a look at the long-term chart for the iShares MSCI Emerging Markets ETF (NYSEARCA: EEM), we can see how it’s still 24% below its 2007 peak. More →

  • 04 Jul
    Why Yesterday’s Retirement Investing Advice Won’t Work In Today’s Environment

    Why Yesterday’s Retirement Investing Advice Won’t Work In Today’s Environment

    • Common retirement investing advice worked ok in the past, but could have been much better.
    • Why would you sell stocks that you bought a long time ago, and that are still growing and paying dividend, to buy bonds that yield less than inflation?
    • Over the long term, little differences amount to a huge difference. Take responsibility for your retirement.

    Introduction

    The common advice on retirement investing is to be overweight stocks when you are far from retirement and then overweight bonds when you are closer to retirement. Some funds offer target date retirement funds that have such a portfolio allocation.

    Vanguard’s target retirement funds invest up to 90% in stocks when you are more than 25 years from retirement, and then lower that exposure to about 50% when you retire. 7 years into retirement, you have 70% of your portfolio in bonds. More →

  • 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 →

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