Learning that drives better investment decisions

Volatility: A Gray Area

Top 5 of the Week of July 16

Heading up our Top 5 this week, Morgan Housel—a partner at Collaborative Fund—examines the nature of long tails in investment and business. Bob Seawright, writer of the Above the Market blog, studies certainty in regards to Robert Burton’s book, On Being Certain. And The Financial Samurai Sam Dogen debates financial goals and families.

From Behavioural Investment, Joe Wiggins asks if volatility is risk. And from Of Dollars and Data, Nick Maggiulli discusses recognizing confirmation bias and how to avoid it…


Finding the Rare Long Tail

Embed from Getty Images
 

  • Long tails are the niche marketable elements that all businesses, both public and venture-backed companies, thrive on
  • And it’s not just businesses—sports, politics, careers, and even investors predominantly profit from the long-tail returns only in their ‘portfolios’
  • Like Warren Buffett, we may own between 4-500 stocks in our lifetimes, but we’ll generate the best returns from around 10 of them because “long tails drive everything”

Read Full Article


A State of Certainty

Embed from Getty Images
 

  • Neurologist Robert Burton methodically demonstrates that certainty is a state of mind, one which doesn’t always represent objective truth
  • Also, findings show that it’s difficult to identify any difference between our certainty surrounding things we’re convinced we’re right about and those we’re convinced we’re wrong about
  • As investors, therefore, we should always be on the hunt for disconfirming evidence rather than settling for positive proof which ‘confirms’ our views even if they’re wrong

What are you certain about in the stock market? Share your comments in the section below

Read Full Article


Millionaire Goals

Embed from Getty Images
 

  • While it’s important to have your financial house in order before having children, there is substantial pressure from peers and the rising cost of living to have a high net worth first
  • Indeed, money and stability are critical to raising a family successfully but the goal doesn’t need to be excessive to meet responsibilities
  • Having a recommended net worth of 2-3 times your gross income is a reasonable, and much more feasible, financial guideline than waiting to be a millionaire first

Read Full Article


Volatility: A Gray Area

Embed from Getty Images
 

  • Investment risk is indistinct and largely undefinable as there are no exact methods or factors for defining it
  • While volatility may be argued as “not risk” by many, that does not mean it isn’t a valid measure of it
  • And though volatility shouldn’t be used as a sole focus, “ignoring it is equally naive”—as permanent capital impairment is undoubtedly influenced by investor reactions to price

Read Full Article


A Better Way to View the World

Embed from Getty Images
 

  • Our pre-existing views and cultural outlooks significantly influence us in helping us see what we want to see
  • Known as confirmation bias, the concept is becoming more prevalent around us with digital systems constantly engaging us and curating content to our biases
  • It’s very easy in this way to create a false sense of reality and only see opinions and information which agrees with our own
  • Instead, aim for “strong opinions, weakly held”—to help you adapt and become a better decision maker

Read Full Article


Top 5 of the Week is a summarized collection of financial investment articles that we like and think you might like too. Having written thousands of pages of equity strategy and company research between us, we understand the allure of the ever-changing world of finance. Investing is an art form—and like everything, something you can work on and improve at. There are some excellent writers out there on the finance web, some offer a running commentary on today’s market, some are doing research, some have tips on how to Become a Better Investor, and some just lift the cloud of fog behind a lot of financial jargon. Each week we will keep you up to date with the top 5 articles worthy of your attention.


 

Anything you would like to discuss about this week’s top 5? Do you have another favorite that isn’t mentioned here? Feel free to add it below. Let’s start a discussion in the comments section!

Do you like Top 5 of the Week? Feel free to share it with your friends.

 


DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article. The Become a Better Investor Team doesn’t necessarily endorse any stocks or shares mentioned in the articles or the author of such articles linked to and summarized in Top 5 of the Week and cannot guarantee the accuracy of its information.

You May Also Like: