How do we know the stock market will produce returns to the investor over the long term? We don't, but it is well worth the risk. There is a lot of criticism of corporations today. They are “greedy” and “exploit workers.” CEOs are paid too much. In recent decades wages have become stagnant. Jobs are being sent overseas where labor costs are cheaper. As an American investor, I would like to … [Read more...]
Are You Content With Your Stock Exposure?
Coping with volatile stock markets means having stock exposure that is tailored to your individual risk tolerance. When set correctly, you will not lose sleep when there is a correction...like the one happening now. Don't do something, just stand there. - John Bogle If you have to do something, re-assess your risk tolerance. - NoRobo Guy As I write this, the stock market is down … [Read more...]
The Peak of My Delusion
Investing in single stocks can be exciting, but they can also be hazardous to your financial well being. Here is how I learned that lesson the hard way. It was the late 1990s, and the stock market was booming. You had to try not to make money. I was at the peak of delusion, the most extreme point of self-deception. My skill in picking stocks was the catalyst of my good fortune. During this … [Read more...]
Timing Recurring Investments
Investors are always looking for ways to improve returns, including adding steps to determine when to add new investments to a portfolio. This post explores timing strategy, and why the practice of managing the contribution schedule will make improving returns unlikely. One of the basic principles of sound investing is 'do not try to time the stock market.' With that in mind, let's consider … [Read more...]
What About Market Extremes?
There is intelligence in crowds, and at other times, people act like lemmings. Another way to put it is markets are efficient, but they are not always rational. On the one hand, you have a multitude of financial corporations funding armies of analysts, along with hedge fund managers and portfolio managers, all working 8-14 hours a day to study the companies making up the stock market. All are … [Read more...]
Predicting the Future
If past performance is no guarantee of future results, then how can I estimate what will be the future return of my entire portfolio for the particular risk level I am taking? John C. Bogle, in his 1999 book "Common Sense on Mutual Funds" emphasizes an Occam's Razor approach to investing, particularly when you index your portfolio to broad market indices. He looked at all 10-year periods … [Read more...]