“Admit What You Don’t Know and Be OK with It”
Top 5 of the Week of April 25
This week we take a look at momentum investing with Ben Lavine, chief investment officer, and writer at ETF.com. Jeremy Miller, investment analyst, and author of ‘Warren Buffett’s Ground Rules,’ shares the legend’s top investment rule. And Gary Shepherd from International Adviser has herded together a number of professional, yet very different perspectives’ on value versus growth investing.
Naki Mendoza, a blogger from Devex Impact, guides us along the best path to investing large capital in high-growth frontier markets; those in developing countries. Bill Barker of The Motley Fool shows that a dollar invested in the S&P 500 back in January 1966, today would have become $102—which seems great. Or is it?
Momentum Rules
- Momentum: an investing strategy that capitalizes on large increases in share price and by following trends in the market leading to even further gains
- The compounding benefits of time is it’s major selling point—money makes more money—but the opposite is also true; failure also breeds failure leading to eventual probable value destruction
- Don’t use it exclusively when making investment choices; incorporate momentum investing as part of a diversified portfolio
“Admit What You Don’t Know…
- …and be OK with it.” Following this advice can set you free as an investor; markets behave randomly short-term and acknowledging that you can’t predict them will let you tune out the BS
- Successful investing is about not letting our emotions play on our decisions or trying to guess and predict the markets—because no one can
- Define your own acceptable risk-return-ratio and change your approach to long-term thinking to better ride out any short-term market flares
Value vs. Growth Investing—Who Wins?
- Warren Buffett believes one does not exist without the other; there are a number of ways to successful growth investor performance but no manager would buy or sell without looking at price
- In 2016, value investing hasn’t outperformed but growth and momentum stocks have been underwhelming, despite this, popularity of growth investing hasn’t topped out
- Though one view is that “growth and value managers are ‘equally deluded,’” growth managers have nothing to fear just yet as currently both paths remain top approaches to equity investing
Think growth investing has lost its ‘momentum’? Is value investing outdated? Share your comments with us in the section below
Large Returns Mean Large Gambles
- The high risk of investing in private equity is balanced by huge upside potential of commercial innovations and business models profiting so developing economies can prosper
- International Finance Corp., (IFC) guidelines to best navigate frontier markets place utmost importance on any fund manager having a local presence; the best offense is always a good defense
- No such thing as business as usual in frontier markets; as well as the usual risks involved in equity investing, developing economies face other threats too —anything from conflict to natural disaster
Painting the Stocks Picture from Last 50 Years
- $1 becoming $102 in past 50 years—if you’d reinvested all dividends and hit no cost problems—doesn’t live up to longer-term historical averages
- Time periods look the same on paper, but not when you consider inflation—better returns in the last century were from 1916-1965; triple those of last 50 years
- Our expectations for the future should factor the benefits of compounding for long-term high returns, but over decades, short-term returns may be affected by low or negative returns before then
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.
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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 Babinow 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.