Who Is the Greatest Stock Picker?
Top 5 of the Week of February 20
Bobby Hoyt kicks off our Top 5 this week with his approach to ridding yourself of student loan debt as featured in the Business Insider; as learned from personal experience. Wesley Gray, editor and CEO of Alpha Architect, compares super investors; Warren Buffett and Peter Lynch. And Aleph Blog’s David Merkel wonders at our current market; are we heading into the record books?
Author Daniel Solin writes about what makes us believe the lies we’re told in his self-named blog. And A Wealth of Common Sense’s Ben Carlson shares his guide to asset allocation for financial advisors…
Pay Debt Off ASAP to Free Yourself
- Be aggressive about your debt strategy; don’t let other people influence your frugal habits; feel good about what you’re achieving
- Your debt takes precedence over everything else, and don’t be dissuaded from your path by trying to keep up with what your peers are spending
- Above all else, get your head in the game; having the right mindset is the only way to clear off significantly large debt amounts like mortgages and student loans
Who Wins the Factor Horse Race: Warren Buffett or Peter Lynch?
- By comparing how much of the two investor’s—Warren Buffett and Peter Lynch—performance is linked to one or more factors we can work out who is the “greatest”
- 7% of Buffett’s 10.6% annualized out-performance is explained by factors such as low-risk, quality, and value; resulting in alpha of 3.6%
- Of Lynch’s 13.7% annualized out-performance, only 5.4% can be explained by exposure to outlying factors, leaving a huge 8.3% of alpha; indicating that Lynch wins the factor horse race
Trading in Special Times
- If it lasts till February 27th, the S&P will have survived the longest record streak (of not losing 1% or more) since 1995
- Making today’s market pretty special indeed, and inciting argument among investors that it can go no higher—but it still could
- Leaving asset allocators with low stock allocations with the most to lose; if they decide to “chase the rally”
What do you predict for this potential market streak? Share your comments in the section below
All Lies?
- The biggest “lie” told by the securities industry is that it will help you achieve your retirement goals by “managing” your money
- Your broker’s insights, their market timing, and “outperformance” at stock picking are not necessarily working in your interest but their own
- As investors, though, we continue to buy into their “lies” that they work hard on our behalf because if it is repeated often enough to become a part of our reality—we stop trying to figure out what is true
The Importance of Asset Allocation
- Up until now, investors have always been more concerned with security selection over asset allocation
- It is only really possible to achieve good allocation in hindsight, but you should always have a plan to follow for your investment process
- As a financial advisor you need to be able to explain your choices: educate, adjust, and communicate your process at all times
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!
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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 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.