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Don’t get Caught Up in the Madness

Top 5 of the Week of January 21st

William Selden, author of RiversHedge, kicks off our Top 5 this week by sharing multiple thoughts on retirement finance. Writing for Alpha Architect, Larry Swedroe asks if active alpha can cover taxes. And from Of Dollars and Data, Nick Maggiulli encourages us to remain optimistic.

Nick, from the Demonetized Blog, discusses the importance of market regimes. And Todd Wenning of Intrinsic Investing examines the importance of being careful about emotional reactions to news…


A Retired Perspective

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  • Retirement finance can be strangely divisive: some see it as a weird hobby while others are passionate in their perseverance
  • Sequence risk can hurt or help your finance, but there’s nothing much to be done other than be extra cautious about what you spend early in your retirement horizon
  • Be wary of Monte Carlo simulations as little knowledge and reliance can be a hazardous combination

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Set Your Sights on the Right Goals

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  • Recurring published evidence consistently reminds investors of the difficulty with winning at active management—you can, it’s just the odds aren’t in your favor
  • In addition, the same is true for tax-advantaged accounts but even worse for taxable investors for whom after-tax returns are the important ones—despite the fact they focus on pre-tax returns
  • Ignoring the impact of taxes on active returns can be one of the biggest mistakes to make

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What Goes Down, Must Come Up

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  • Most factors remained flat until the final quarter of last year, which corresponds with the decline of global equity markets
  • The two most significant declines in market history (1932 and 2009), both had the most powerful recovery afterwards
  • As we entered 2019 with the market down by 14.75%, many investors will be wondering what the future holds—we could be in for a period of post-traumatic growth

How do you feel about the market in 2019? Share your comments in the section below

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Highlighting a Crucial Topic

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  • Market regimes aren’t covered much in financial writing—these are certain repeat periods of a market cycle
  • But it’s important to understand market regimes because markets are fluid and changeable as investors adapt and respond to what’s happening in the economy
  • It’s good practice to ensure your portfolio will stay strong throughout all types of market regimes

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Don’t get Caught Up in the Madness

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  • It’s important not to undervalue what can be gleaned from financial resources, whether reading or writing—but equally important is when reading, not to overreact to negative news
  • As investors, we want to be prepared to buy or sell at the right price—reacting emotionally can make us lose our focus on this though
  • Don’t get caught up in the madness and miss being able to take advantage of price fluctuations

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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.