S&P 500

  • 21 Aug
    Real Estate Vs. Stocks – What Sven Says Makes The Better Investment Today

    Real Estate Vs. Stocks – What Sven Says Makes The Better Investment Today

    • As investors, we must be primarily concerned about risk and return, not asset class.

    Introduction

    I often get a question from people that have a decent amount of money about where to put that money as they know I specialize in investing, and especially the stock market.

    They’re often surprised when I tell them to invest in real estate and to leave the stock market to those who can take advantage of the volatility and greater risks especially now that stock valuations are extremely high, or to do both as an excellent diversification strategy. More →

  • 15 Aug
    Is It Possible To Find A Wonderful Business At a Fair Price In Today’s Environment?

    Is It Possible To Find A Wonderful Business At a Fair Price In Today’s Environment?

    • We’ll first define what a wonderful business should be and what a fair price would be in relation to general stock market risk.
    • We’ll look at price earnings differences among sectors and countries to find places to look for great investments.
    • A list of S&P 500 companies with low P/E ratios shows that it isn’t easy to find wonderful businesses at a fair price.

    Introduction

    Warren Buffett’s main advice to investors is to find a wonderful business at a fair price. Now with the S&P 500 price to earnings (P/E) ratio of 24.34, that implies an earnings yield of just 4.1% which makes me ask myself, is it possible to find a wonderful business at a fair price today?

    I’ll first describe what a wonderful business is, look at what would be a fair price for it, and then look to see if there are any such businesses around. More →

  • 04 Aug
    Think The Biggest Companies Of The S&P 500 Will Outperform? History Says Otherwise

    Think The Biggest Companies Of The S&P 500 Will Outperform? History Says Otherwise

    • The strongest companies in the S&P 500 may look invincible now, but history shows us this won’t last forever.
    • None of the companies in the S&P 500’s 1980 top 10 are still there now.
    • Top 10 S&P 500 companies largely underperform the S&P 500 in the long term.

    Introduction

    Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), and Johnson & Johnson (NYSE: JNJ) are the 5 largest holdings of the S&P 500 accounting for 11.74% of the index. The other 495 companies account for 88.26% of the S&P 500 which is a pretty strong imbalance, but that’s how the S&P 500 is formed. Its weightings are based on market capitalization. The bigger the market capitalization, the bigger the weighting in the index. 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 →

  • 12 Jul
    Want A Higher Return With Less Risk? This Company Is A Better “Buy & Forget It” Investment Than The S&P 500

    Want A Higher Return With Less Risk? This Company Is A Better “Buy & Forget It” Investment Than The S&P 500

    • Berkshire Hathaway offers similar diversification, a better book value, higher growth, and it doesn’t do stupid buybacks.
    • Share this article with those you know who are heavily invested in the S&P 500 and are buy and forget it investors, they’ll appreciate this and it might change their lives.

    Introduction

    The predominant investing paradigm is to invest in the S&P 500 because of its low risk and  good diversification, and because it has done well in the past. Given this, most buy and forget investors simply put their money into the S&P 500.

    Now, what if there was an investment that offered the same level of diversification, less risk, and a higher return? It would be logical for the buy and forget it investor to immediately invest in such an investment vehicle. 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 →

  • 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 →

  • 26 May
    Corporate America’s Focus Isn’t On Shareholder Value Creation

    Corporate America’s Focus Isn’t On Shareholder Value Creation

    • Earnings haven’t grown in the last 10 years. What is corporate management doing?
    • A temporarily higher stock price isn’t good for the majority of investors, especially those investing for the long term and retirement.
    • Buybacks are idiotic, management pays $ 3million for a home they can build for $1 million.
    • There is only one company that does smart buybacks.

    Introduction

    There’s a huge problem affecting corporate America that nobody is seeing because most people think in positives and negatives, and can’t think on an relative scale. What do I mean by this? Well, when shareholders judge management, they look at whether the bottom line is positive and in line with what the competition is doing. Nobody is assessing whether it could have been much better.

    We expect only the best from our favorite athletes and we hope our children develop to their full potential but when it comes to corporate management, we remain mostly silent and accept whatever they throw at us. More →

  • 25 May
    Building The Best Portfolio For The Upcoming Recession

    Building The Best Portfolio For The Upcoming Recession

    • Stocks will be hit badly. Low price earnings and high book values can provide some safety.
    • Bonds look much better than last year.
    • Alternative investments can be a jack-pot for your portfolio.

    Introduction

    Yesterday we discussed how a recession is imminent, especially if the trending down credit growth turns negative.

    The most important thing now for investors is to prepare for such an event. Today, we’re going to dig deeper into the recession-related investing risks as different asset classes will be affected differently. More →

  • 22 May
    Don’t Let Information Avoidance Threaten Your Long Term Returns

    Don’t Let Information Avoidance Threaten Your Long Term Returns

    • There are lots of ways to present historical data to achieve different outcomes.
    • Information avoidance can be extremely harmful in investing and health. Just think about what obesity does to your health and a high price to earnings ratio does to your investment returns.
    • If you’re open to some contrarian information, Investiv Daily is the platform for you.

    Introduction

    A recent survey showed that global investors expect returns of 9.5% above inflation while advisors expect returns of 5.3% above inflation. Such expectations come from the fact that when you go to speak to the majority of advisors, they just show you the best possible data set they have in order to sell their products. More →

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