Investing: Survival of the Rational
Top 5 of the Week of October 2
The Reformed Broker Joshua Brown heads up our Top 5 this week with a view on Warren Buffett’s “Dow 1 million call.” The Intelligent Investor Jason Zweig explains why private equity fund managers should be worried. And Ben Carlson, writing for Bloomberg, examines the pros and cons of investing strategies in a “low-return world.”
Sean Stannard-Stockton, the author of Intrinsic Investing, discusses where today’s market is headed. And A Teachable Moment’s Anthony Isola urges us to watch our behavior…
Dow 1 Million: A Possibility? Or Plain Crazy?
- Warren Buffet made a prediction recently at the Forbes 100th Year Anniversary party in New York that the Dow would hit over 1 million in 100 years
- To achieve this, the Dow would have to “skyrocket 4,500%” from its current value—which is already sitting at a record high
- So, is this reliable optimism or crazy talk? Well, it’s possible “if you do the math,” but the Dow of tomorrow will be a different beast to what it is today—and require less growth than we’ve seen in the last century
What do you think are the odds of Dow 1 million happening? Share your comments in the section below
The Dawn of a Price Competition
- Recently, there has been a trend of ETF funds created that mimic the returns of private equity funds which, until now, only the very wealthy could afford to invest in
- The idea is designed to enable anyone to be able to invest in these ETFs and gain the same outperformance without laying out the expensive fees
- While this performance won’t last permanently, if you can achieve the same even for a short time then “fee kings” better watch out; a price competition is beginning on their doorsteps
“How to Invest in a Low-Return World”
- Don’t be fooled into thinking you are indecisive by investing the way you always have and just accepting the low-returns of today’s market—“doing nothing is a decision”
- While reducing your risk by moving to cash in advance of a correction increases your options, you have to time the movement right twice: when you get out and go back in
- Looking for special market niches and expert investment managers can provide streams of outperformance, but should be done in small measures to control portfolio risk
The End of the Market is Nigh
- Over the past seven years, stock market experts have been declaring that the market is drastically overvalued and bound for a crash
- These announcements have found an attentive audience in those investors who went through the 2008 market crash and who expect the worst
- While we may be headed for a 10 or 20% decline (which happens quite regularly), bubbles are much rarer, and the current high is due to low-growth companies reaching record valuations not speculative stocks driving it up
Investing: Survival of the Rational
- Evolution has altered the survival traits of our historical ancestors into destructive behaviors of paranoia and delusion
- These qualities which kept our ancestors alive in the past have a powerful impact in distorting our view of reality today—which can be especially dangerous where our investments are concerned
- As an investor, therefore, it’s important to recognize when we’re under the influence of our delusions and actively change our behavior or pay someone to manage your investments for you
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 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.