Investing
Part 1: Closing Education Gaps and how to defend against Bias
Careers often deviate from what you studied in school. As you pursue a career path it is important to understand how to close education gaps as well as how your personal biases can influence decision making
Understanding Geopolitics and History will make you a better investor
Geopolitics will shrink the pie and understanding history will help you become a better investor
Reversion to the mean (and humility) really matters
Reversion to the mean is a really important concept. Past stock market returns influence future returns.
Understanding Value vs. Price is important to Investing Wisely
Understanding the difference between Value and Price is critically important to Investing Wisely.
Financial Security is achieved by Wisely Investing not Speculating
Financial Security is achieved through Wisely Investing, not speculating. People often mistake speculating as investing. Let’s talk about the differences.
You do not need to be a Financial Analyst to obtain Financial Security
Everyone can be a successful investor and build their net worth to obtain Financial Security. The key is to know how to invest based on your knowledge.
A link to a Compound Interest calculator that shows you the power of investing early in your life.
Albert Einstein described compound interest as the eighth wonder of the world. The power of regularly Investing Wisely, at an early age, will generate a tremendous amount of wealth for you. Set up your Budget to give you a line of sight on your path to Financial Security.
A 5:48 video by Warren Buffett where he explains Intrinsic Value
Investing is putting money out today and getting money in the future. Intrinsic Value is determined when and how much cash you are likely to get in the future. All those future cash flows are discounted back using a discount rate correlated to the US Government 10 year Treasury bond. The math is fairly simple; the discounted present value of future cash. What is much more difficult is to estimate how much cash and when you will receive those cash payments. If you do not perform this analysis then you are speculating, not Investing Wisely. You don't need to do this analysis if you invest in a low cost diversified exchange traded fund holding many businesses.
45 minute video on Finance, business financial statements, risk/return and the power of compounding interest: William Ackman, "Everything you need to know about Finance and Investing in Under an Hour"
This video has been viewed over 6.5 million times and was delivered via the Big Think Channel. William uses a fictitious "Bill's Lemonade Stand" to illustrate assets, liabilities, revenue, expenses, cash flow, debt vs. equity, compound rates of return and more. Well presented and worth a look if you are interested in a basic overview of what goes into the determination of intrinsic value and long term wealth creation.
A Podcast: "Rational Reminder: Charles D Ellis: The Losers Game"
Trying to beat the market is a fools game. There has been rigorous research that shows that active management loses to passive management. Charles Ellis, former Chairman of Yale's investment Committee explains why, in today's world where information is ubiquitous, it's a losers game to try and pick stocks OR to expect a financial advisor or money manager to beat the market.
A Website: "Professor Hendrik Bessembinder: Another reason why selecting individual stocks does not pencil"
You will be barraged by people who earn their living by selecting individual securities (aka "active" vs. "passive"). They will be very persusavive but I suggest that it is nearly impossible to find a needle in the haystack. Since 1926, 50% of total stock market returns have been from 86 companies. I encourge rethinking stock picking if you (or a hired money manager) think you can pick less than one third of one percent of all businesses. If you don't find the 4.3% of all businesses you are destined to perform worse than treasury securities.
A Website: "The Merriman Financial Education Foundation"
After Paul Merriman sold his Registered Investment Advisory practice over 10 years ago he founded the Merriman Financial Education Foundation. This non-profit is solely committed to education and receives no compensation for managing money. There are no conflicts of interest. The Foundation leans heavily on established academic research to support a very simple pathway for long term wealth creation. The site has links to free books, articles and tables that support an effective and simple approach to investing for the long term.
Recent Posts
Who is the customer? Why Passive wins.
Active asset managers seek the endorsement of Financial Advisors. Investors seek the advice of Financial Advisors. Who is the customer? The long term performance of low cost passive funds wins hands down.
Japanese internment; a lesson, fear and poor decision making
On February 19, 1945 the Presidential Executive order 9066 devasted the lives of over 100,000 Americans of Japanese descent. Fear is an emotion that can lead to poor decision making.
Rent Control and Fair Value
Government regulations impact your financial well-being. Let’s look at rent control and eminent domain as two areas where public policy can affect your financial security.
Investing: It could be simple
Investing could be so simple yet some financial advisors create unnecessary complexity to justify their fees