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Is Soaring US Debt Truly Troublesome?

Top 5 of the Week of December 19

Ben Carlson, the author of A Wealth of Common Sense, heads up our Top 5 this week with a look at faulty Wall Street assumptions we can make as investors. Tren Griffin of 25iq argues that only by being contrarian can we outperform the market. And Urban Carmel, writer of The Fat Pitch blog asks if the US debt has finally reached a tipping point.

Jason Zweig; The Intelligent Investor urges you to always ask questions of your financial advisor about any past performance statistics. And Cade Metz, from Wired, uncovers the thousands of data scientists behind the latest crowdsourced hedge fund…


Investing Myths Debunked

 

  • Investing isn’t always about trying to find the next big thing all the time; it’s about good portfolio management too; sound construction and managing your risk levels well
  • Don’t believe that financial jargon is impressing anyone; it’s far better to convey a message simply yet effectively
  • Complex strategies are not the best approach to a complex market; remember, less is more
  • Past performance is not a great indicator of the future; it needs putting into context to be of help

Feel the list is missing one? What assumptions do you think investors make? Share your comments in the section below
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Stand Out From the Crowd to Outperform

 

  • It’s not possible to run with the crowd and beat their returns at the same time
  • Being contrarian isn’t about doing the exact opposite of what the crowd chooses—it’s about capitalizing on expectations gaps
  • This gap is the difference between expected value and market price—this should be the driving motivator behind investment decisions
  • Hone it as a skill to work out exactly when to be contrarian and when not to be

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Is Soaring US Debt Truly Troublesome?

 

  • The excessive debt of the US has become a major concern for investors; the fast rise implicates an economy at the peak of an impending disaster
  • The rise is mostly due to federal government and corporate debt; this being the case, it is not a current cause for concern because they can be supported by income and assets
  • Contrary to other times of economic expansion, the household debt has actually reduced
  • And consumer debt levels influence on economic growth will propel the economy forward not back

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Tempted By Past Performance Data? Not So Fast

 

  • Backtesting is a powerful tool to use justifiably and find relationships between stocks for outperforming the market
  • But essentially if you look back far enough you can find an impressive link between any two factors
  • It is therefore a difficult tool to evaluate and assess its worth because “correlation isn’t causation”

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The Blind Leading the Blind

 

  • 7,500 anonymous data scientists are the artificial ‘brain’ behind a hedge fund belonging to startup company Numerai
  • Financial information collected by the fund is converted into an abstract form before being distributed among the scientists, so they can create better models for the hedge fund to analyze and learn from
  • Everyone works from encrypted information, and they’re all recruited online and paid in bitcoin—ensuring complete anonymity and data security

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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.