Reflecting on a year gone by is often, at least to some extent, an exercise in revisionist history. This isn’t necessarily a bad thing; many of the differences between our memories and experiences are minor and inconsequential. In some cases, the variations in these realities can help us persevere and move out of the past and into future endeavors. But as investors, revising the memories of the past can be problematic and potentially hinder future success. Behavioral finance is the study of ... [Continue Reading]
Articles and resources related to Diversification.
For investors who recall the experience of 1999, it was either a fantastic year or a difficult one, depending on the types of stocks in their portfolio. Investors who concentrated their portfolio among growth companies, which earned little or no profits, remember 1999 as a fantastic year, delivering a return of 41%. Investors with the opposite philosophy, such as Warren Buffett, chairman of Berkshire Hathaway, did not fare as well. Their focus on value companies with large profits lost ... [Continue Reading]
The long-awaited IPO of Saudi Aramco is here and gives investors the first chance to own a piece of the world’s largest oil company. This IPO is historical in that Saudi Aramco becomes the world’s first $2 trillion company. For perspective, very few companies have ever been valued at over $1T, with Apple and Microsoft being the only two publicly traded companies to currently hold that designation. So, should investors race to grab a piece of this gigantic company’s stock? While ... [Continue Reading]
Understanding how markets function is critical when making investment decisions. This is why Hendrick Bessembinder’s 2018 study of historical stock returns was so important; it revealed to investors that the vast majority of individual stocks underperform. This information is critical. It helps us better understand why active stock-picking managers underperform at such a high frequency, and it gives us a deeper understanding of the importance of portfolio diversification--not just to mitigate ... [Continue Reading]
March 9, 2009, is an important day in our shared history. We didn’t necessarily know it at the time as it took a few months for the significance of the day to reveal itself, but it was on this date when the financial markets hit rock bottom during the Global Financial Crisis (GFC). From that day forward the markets stopped their painful retreat and began to recover. That was ten years ago now, and as we reflect on those ten years, of course there are countless learnings and insights that could ... [Continue Reading]