Long-Distance Running Through Stock Market Minefields
Top 5 of the Week of August 22
Dr. Daniel Crosby kicks us off this week by comparing the similarities between long-distance running and investing on his blog at Nocturne Capital. Andy Clarke, a senior investment strategist at the Vanguard Group, elaborates on the index fund; “one of the greatest innovations of the late-20th century.” And Bob Seawright, author of Above the Market, examines the growing movement of evidence-based investing.
A Teachable Moment’s Anthony Isola discusses how investors should act as historians and learn from the history of the stock market to build wealth. And Vitaliy Katsenelson, writer of the blog Contrarian Edge, uncovers the values of value investing…
Just As In Long-Distance Running, So Too In Investing
- Setting achievable personal goals is highly motivational; it creates a sense of purpose for both training and running a marathon as well as when building wealth
- Focus on your own race and investments; concentrating instead on your neighbor’s success will inevitably lead you to trip and fall—in running and investing
- Find those who will support your goals and help you reach the finish line; a skilled advisor can help during both the high and low points
Asset Management Costs are Declining; Indexing is the Catalyst
- Despite advances influencing productivity gains and prices declining, the costs in the financial services sector of 1900 amounted to the same almost a century after
- Today, the rising efficiency of the index fund has begun to affect asset management by lowering costs and fees
- Not a new investment strategy by any means, the first index fund began in 1976, it is still in the “early stages of adoption” but growing steadily in popularity
“Financial Advice Ought to be Evidence-Based…Duh!”
- The essentials of evidence-based investing are that all financial advice should consider the client’s needs and not be given unless supported by good evidence
- But judging what evidence is worthy is not that easy; it can go in different directions, be difficult to find the right sort, and can be just the wrong type of evidence
- Our bias-blindness leads us to find evidence that suits our theory rather than be objective—be extra analytical of both investment processes and supporting ‘evidence’
Stock Market Minefields to Avoid From The USA’s Financial History
- The stock market is in a bull market 85% of the time: lasting longer than bear markets
- Never buy stocks or financial products during market peaks
- The only thing you can be certain of in the stock market is uncertainty, but that’s not a good reason for not investing
What valuable lessons do you believe stand out in the history of the stock market? Share your comments in the section below
Value Lies in Future Earnings
- Value stocks don’t necessarily mean cheap, and growth stocks don’t necessarily mean they’re expensive—both investing strategies are not as black and white as that
- Value investing works better if approached three-dimensionally, by considering value, quality, and growth
- Though not as easy to judge quantifiably, quality and growth will improve your value returns
- Get a bargain by buying stocks at a discount of their worth but understand that’s not the same as ‘cheap’
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.