Value Investing with Abigail Adams and Warren Buffett
Top 5 of the Week of July 11
In this week’s Top 5, we begin with Sean Williams of The Motley Fool’s advice on three value traps that are the investing equivalent of wolves disguised in sheep’s clothing. Tinesh Bhasin from the Business Standard shares wealth managers’ approaches to risk profiling and all that it entails. And Marc Lichtenfeld, a blogger at Investment U, takes an in-depth look at the state of the US economy.
Mitchell Mauer from The Stock Market Blueprint teaches us what we can all learn from Abigail Adams, the second First Lady of the United States, about investing. And Dan Caplinger, of AARP, shares some investing nuggets of wisdom from financial value guru, Warren Buffett.
Fool Me Once, Shame on You
- Be sure to do your due diligence on “good value” assets before investing in ones that look great on paper; they could trash your portfolio
- Though backed by the US government, long-term US Treasury bonds yield minimal return in relation to the cost of inflation
- Given recent events, while they look cheap, European banks aren’t the value asset they appear to be
- Avoid your portfolio being sucker punched by companies with “thesis-altering events”—look below the glossy value exterior to uncover the truth: why these companies are cheap in the first place
How Do You Assess Risk?
- Understanding an investor’s behavior following market volatility or financial crisis is key to a financial advisor being able to carry out a risk profile
- Some use psychometric tests, lengthy discussions, and hypothetical risk-and-return scenarios to assess how people behave when faced with these situations
- The goal is to better understand risk tolerance and so to be able to provide advice tailored to the individual
Do you know your risk tolerance? Have you been through one of these psychometric tests? Share your comments in the section below
Are Things Really That Bad?
- It’s in the ‘running for office’ political candidate’s best interest to make you believe they can save the day; so the media do their best to fool you that we’re all going to hell in a handbasket
- If it’s as bad as they are making out, we wouldn’t be spending money on luxury expenses outside the household budget
- Though it’s unlikely that you’ll find others to agree, the current market shows strength through to the end of the year
Still Original Today; “Buy Low and Sell High”
- As well as being John Adams’ wife (US President 1797-1801), Abigail Adams was renowned for being a shrewd investor who built a great fortune for herself and her family
- Her keen foresight led her take advantage of a falling currency and convert cash into bonds; five years later she made more than twice its original worth
- Her most valuable lesson; not to panic in times of financial crisis but to keep your cool and see the moment as an opportunity rather than an emergency
Wealth Wisdom From Warren
- Though there’s nothing exciting about the more mundane stocks on the market—diapers, soap and toilet paper—they are the closest thing you will get to for reliability in long-term returns
- Brand strength and customer reputation convert into shareholder value and so into outsized investment returns as well
- “To err is human,” and forgiveness may be divine, but far better is to learn from your investing mistakes and teach the next generation as well
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 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.