Keep Calm and Carry on Diversifying
Top 5 of the Week of June 27
We begin this week’s Top 5 by delving into the Internet of Things (IoT) world and Steve Heller of The Motley Fool talks us through investing in it. Newfound Research identifies a number of flaws behind solely using performance screens in asset management. And Selena Maranjian—also from The Motley Fool—shares value investing guru, Charlie Munger’s words, “All intelligent investing is value investing,” and highlights some insights we can learn from them.
With the world still reeling from the UK’s choice to Leave the EU, Allison Schrager from Quartz, advises us to remain calm about the impact of Brexit on our investment portfolios. And Richard Stavros of Investing Daily, considers the potentially dark economic future we face and questions whether Brexit marks the end of capitalism…
“50 Billion Smart Devices…
- …will be connected to the internet by 2020.” If your risk tolerance can deal with the high-volatility—that comes with all new trends—then analyze the many fields or technologies in IoT to invest in
- Carry out due diligence on the companies you consider; understand the business and the risks each stock will involve
- Don’t be blindsided by the “trillion-plus market opportunity,” do your homework and be rational about IoT’s investment potential
Evaluate Your Fund Evaluation Process
- Past performance is not an indicator of the future—don’t be encouraged by yesterday’s ‘winners’, the likelihood is they’ll be tomorrow’s underperformers
- Don’t screen for alpha only; alpha is defined by the market model you use and is probably just a result of risk not defined in your model
- Investors know that stock picking is luck as much as skill; the same is true for choosing a good investment manager, and successful fund evaluation requires more than just performance screens
Lessons from Value Investing
- Keep emotions out of your investment decisions, don’t avoid stocks that look mundane and don’t become overly concerned about the growth vs. value distinction
- Do be aware of the difference between investing and speculating (gambling) and be contrarian, don’t follow the crowd
- Be skeptical when considering cheap stocks—there might be a reason they’re undervalued—and exercise patience in your chosen value strategy
Keep Calm and Carry on Diversifying
- Markets can respond dramatically to unexpected events, don’t lose your head though too, investing is always risky, but stay the course; the market—and your portfolio—will eventually recover
- In this current state of volatility, it’s a terrible idea to try and time the market by selling or pulling out, whether you’re in need of the money—close to retirement perhaps—or not
- Diversification is the best shield for your investment portfolio; invest in global funds and alternative assets, such as real estate to help mitigate the risk in future economic uncertainty
What Happens Next?
- The end of globalization? The global free trade we’ve enjoyed since WWII may be ending but that doesn’t mean global investment opportunities are—we may just need to hunt harder for them
- The end of Western Capitalism? Investors would be better served in the uncertain dark future—and protected—by tougher but sound financial regulations, and free markets being allowed to self-correct
- Ultimately though, Western Capitalism is beneficial for all and so, will endure, but only if we take the right steps
Is the end of Capitalism in sight or not? Share your recent experiences following the Brexit impact in the comments section below
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.