Nasdaq

  • 25 Aug
    Why You Shouldn’t Hold Your Facebook Stock Forever

    Why You Shouldn’t Hold Your Facebook Stock Forever

    • Good long-term investments can only come from companies that possess durable competitive advantages.
    • I’ll mention 6 things to watch for when looking for a durable competitive advantaged.
    • Today’s tech companies don’t have large moats, but this doesn’t mean you shouldn’t invest in them.

    Introduction

    As you probably remember, 1999 was a great year for stocks and a relatively bad year for Warren Buffett and Berkshire Hathaway (NYSE: BRK.A, BRK.B).

    Warren couldn’t really compete with the hysteria surrounding dot-com stocks and his performance in 1999 was a mere 0.5% increase in book value while the S&P 500 was exploding. This was due to several of his investments lagging the market due to lower operating earnings. Nevertheless, Buffett mentioned in his 1999 letter to shareholders how he was still happy to hold onto those companies because over time, he believed his businesses would do better than the S&P 500. More →

  • 18 Jul
    No Matter How Crazy The Trend It, Don’t Fight It

    No Matter How Crazy The Trend It, Don’t Fight It

    • The economy has only grown 18% in the last 9 years while the stock market’s growth is measured in three digits.
    • Such imbalances can only last as long as the factors creating them persist.
    • A massive drop in stocks awaits us, but it won’t happen all that soon as the flow of funds is too strong.

    Introduction

    The S&P 500 (NYSEARCA: SPY) is up 259% since March 2009, and is showing no intention of stopping. More →

  • 08 May
    Heuristic Simplification Makes Everyone Happier, But It’s Terrible For Investing

    Heuristic Simplification Makes Everyone Happier, But It’s Terrible For Investing

    • Irrational behavior leads to higher risks and lower returns. We’ll show how to avoid it.
    • We’ll describe how a cognitive bias can be extremely dangerous in the current market environment.

    Introduction

    Standard finance assumes that investors always behave rationally and therefore it ignores cognitive and emotional biases that might affect investor behavior. But such phycological biases don’t only affect the individual investor, but can also affect the majority of the investing population. When the majority of investors behave irrationally, the market becomes inefficient and extremely dangerous as risks increase and longer-term returns turn negative.

    Today, I’ll describe the most common psychological bias affecting investors and making them behave irrationally. More →