S&P 500

  • 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 →

  • 05 May
    The Market Is Dumb And Getting Dumber

    The Market Is Dumb And Getting Dumber

    • The number of analysts is declining, stocks don’t react to earnings nor news anymore, and the underlying economic environment is rigged.
    • However, as investors, we have to always look at risk and reward as there is always a way to profit.
    • Protecting yourself from market ignorance doesn’t even cost much.

    Introduction

    I would define a dumb investor as one who doesn’t think about risk in relation to reward, and therefore I fearlessly say: the majority of investors are behaving in a pretty dumb way.

    This is a heavy statement, especially considering markets have performed nothing short of spectacularly in the last 8 years. As evidence, the S&P 500 is up three-fold since 2009 and continues to strongly march ahead. More →

  • 27 Apr
    The S&P 500 Only Has Sentiment To Thank For The Gains In The Last 5 Years

    The S&P 500 Only Has Sentiment To Thank For The Gains In The Last 5 Years

    • Positive sentiment alone has added 950 points to the S&P 500 in the last 5 years.
    • The S&P 500 has returned 12% in the last 5 years, but only 4.5% in the last 10 years and just 2.7% in the last 17 years. Don’t let current positive sentiment lead you to such terrible long term returns.
    • The opportunity cost might be significant, but the long term picture of not following the herd looks much better.

    Introduction

    I know that if I buy a stock with a price to earnings (P/E) ratio of 10 and stable future business prospects, my very long-term return should be around 10%, plus inflation and eventual growth. If I buy a stock at a P/E ratio of 5, my returns will be around 20%, while if I buy a stock with a P/E ratio of 20, my returns will be around 5%. It’s as simple as that, in the long term. More →

  • 26 Apr
    If You’re An Investor, Now’s The Time To Get Out Of The S&P 500, Index Funds, & ETFs

    If You’re An Investor, Now’s The Time To Get Out Of The S&P 500, Index Funds, & ETFs

    • If you only look at averages, passive investing will always outperform active due to lower fees, but you can only expect average returns.
    • The market is skewed and inefficient due to huge flows into passive funds, outflows from active funds which should be doing the thinking, and euphoric management doing large stock buybacks. This creates a highly risky situation.
    • Avoid owning index funds, ETFs, and stocks that are largely owned by passive funds.

    Introduction

    There are two investing worlds. One is the world of active investing where the fund manager you hired analyzes company after company and invests in those they think are the best. The passive manager simply disperses your funds over an index where you will perform exactly as the market performs. With passive investing, fundamentals, dividends, growth, sales, scandals, and business trends don’t matter at all. More →

  • 24 Apr
    Global Growth Is Finally Getting Some Traction, Be Sure Your Money Follows

    Global Growth Is Finally Getting Some Traction, Be Sure Your Money Follows

    • Macroeconomic trends are extremely important for your investing or trading returns.
    • The IMF’s World Economic Outlook is a great starting point for understanding where the risks and opportunities lie.
    • Long term trends show emerging markets and commodities are the place to be.

    Introduction

    Investing is both difficult and easy. It’s difficult if you try to guess what the market’s sentiment will be next week or next month, while it’s easy if you simply look at slow moving structural macroeconomic trends. These trends are like little forces that shape the market, similar to the gravitational forces among planets in our solar system. More →