The best thing about long-term oriented stock investing is that it doesn’t require lot of work by us, the investors. Instead, we loan our money to people running actual businesses – and they work for us. We own shares in these public companies – so when they make money, we make … [Read more...] about Let smart people work for you!
Investing Mindset
How I approach investing
How media get things wrong
Be wary of news briefs from the financial media – they are designed to catch reader’s attention but in reality often mean nothing – or worse could even be misleading. I follow mainstream news but with care. On one hand we investors need to stay abreast with news related to the … [Read more...] about How media get things wrong
Yes stocks are volatile
… but only in the short run. As we saw in this previous post, stocks go down 10% or more every year. More often than not, they also recover quickly. So what return could we expect in a given year? Here is a good chart from J.P. Morgan. It shows the range of annual returns that … [Read more...] about Yes stocks are volatile
Should you invest in gold?
Is gold a good investment in today’s world? After all, gold is no longer the dominant medium of exchange – it has been replaced by national currencies backed by sovereign countries. Our obsession with the yellow metal is well known. Gold coins have been in use for trade since … [Read more...] about Should you invest in gold?
Real investors don’t fear a recession
Recessions and expansions are normal phases of a business cycle in modern free-market economies. A recession occurs when the economy stops growing – instead, it contracts. This happens from time to time – the economy grows in fits and starts. The normal state of an economy is … [Read more...] about Real investors don’t fear a recession
Nobody’s good at predicting recessions
Various organizations and economists in the USA try their hand in predicting when the next recession might occur – none of them have been very successful. The National Bureau of Economic Research (NBER) is the de facto authority that marks the beginning and the end of each … [Read more...] about Nobody’s good at predicting recessions
It’s not healthy to check stock prices every day
If you check your stock portfolio every minute the market is open, you are setting yourself up for failure. Even every day is not good for your portfolio’s health. Perhaps every week is too frequent. Two reasons why this is so: Every-day price changes are random and carry no … [Read more...] about It’s not healthy to check stock prices every day
Most investors underperform the stock market
The bad news is that we, the individual investors, collectively don’t do so well when investing in stocks. The good news is that most of this underperformance is due to our own behavior and therefore can be fixed. Let’s first look at the evidence of our underperformance over … [Read more...] about Most investors underperform the stock market
Beware, the markets go down often!
Because we are long-term investors, we will frequently face market downturns. To better prepare ourselves for these unpleasant but inevitable declines, it is good to study the history of the stock market declines. Looking at the US stock market, on average this is what we … [Read more...] about Beware, the markets go down often!
Investing in installments
One recurring theme in a young earner’s life is that you never have enough money to buy something outright! But what you do have is future cash flow – many years of earnings ahead. You take out loans against the future earnings to buy a car or a house that you otherwise could not … [Read more...] about Investing in installments