Eliminating Non-Market Risk with Diversification

After purchasing 6 or 8 stocks in different industries, the benefit of adding even more stocks to your portfolio to lower non-market risk is small. Overall market risk will not be eliminated merely by adding more stocks to your portfolio. Number of Stocks Held % of Non-Market Risk Eliminated 2 46% 4 72% 8 81% … Read more

A Few Bubbles & Major Crashes Throughout History

Dutch Tulip Mania 1634-1637 South Sea Bubble 1720 Mississippi Bubble 1718-1720 British Railway Mania Bubble 1840’s Florida Real Estate Bubble 1920’s Stock Market Crash 1929 Kuwait’s Stock Bubble Crash 1980’s Black Monday 1987 Japan’s Bubble Economy 1980’s Tech Bubble 2000’s Great Recession 2008 Flash Crash 2010 “From 1900 to 2013, the US stock market experienced … Read more

Body Chemistry & Behavioral Investing

Winning Our brains are designed to perceive trends. If a trend repeats a natural chemical called dopamine is released causing the soft euphoria feeling. If a stock goes up a few times in a row your brain chemistry changes giving you a “natural high.” You effectively become addicted to your own predictions. Losing A financial … Read more

Financial Newsletter Success

Mark Hulbert, editor of the Hulbert Financial Digest, monitors the real-time records of financial writers who report their recommendations in newsletters.  He has tracked the performance of these adviser over the past 26 years, and here’s what he finds: Of the 35 newsletters that existed in 1980: only 13 are still in business today.   … Read more

What You Have Control Over in Your Investing

What you have control over in your investing: Brokerage costs: don’t over trade or pay high commissions. Ownership costs: of products (such as mutual funds, etc.) keep them down. Expectations: be realistic, use historical information to your advantage. Risk: know how much capital exposure you have. Tax bills: maintaining year and longer hold times to … Read more

Collecting Rent From Stocks 101

Collecting rents from the stock market is easy. Income property ownership when purchased properly, so it generates a positive cash flow, can be a solid investment that over time produces wealth and pride of ownership.  Real estate is something tangible or a physical asset that can be touched and seen verses a share of stock … Read more

Durability

Investing requires the understanding of a few common components that determine the differences between businesses. These components are competitive advantage, management, cash, and margin of safety.  All of these components are measurable. In other words they can be measured against other businesses or the industry the business you are evaluating operates under. Here are my … Read more

Knowing Value

What is value?  Value as defined by the dictionary is “the regard that something is held to deserve; the importance, worth, or usefulness of something.”  They key words in this definition for the purposes in this article is “the worth of something.” Value investing focuses on the worth of a business.   Valuation is the … Read more

Value Investing Background

Value investing, is a strategy based on acting on the observation of a clear difference between current price and current value of an investment.  Ben Graham and David Dodd made this strategy famous in their 1934 book “Security Analysis.”  Ben Graham like many was wiped out in the great depression in the late 20’s.  He … Read more