Book of Wise Investors

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First and foremost, there is a large discrepancy in performances when measured over more than 5 years period, between small and large caps throughout the decades. There are times when large caps stocks gained as much as 30% while small caps lost 2% or doubled in value. As a result, there have been greater returns than simply buy and hold ETFs that tracked the broad market when ordinary investors switch from small caps to large caps and vice versa at suitable times. The bad thing is neither your commission based financial adviser or mutual fund managers are going to decide…

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We have been told by the high priests of finance about the importance of investing of future and not saving only, so as to beat inflation. We are also told that even professionals find it tough to time the market, let alone ordinary people like you and I. Put out any charts for the past 40 years for returns on various assets classes, chances are equities brings the highest return over a 40 years period of all assets classes. The conclusion is that we should invest in some actively managed mutual funds/unit trusts with high transaction fees, high load fees…

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“I look for businesses in which I think I can predict what they’re going to look like in ten to fifteen years’ time. Take Wrigley’s chewing gum. I don’t think the Internet is going to change how people chew gum.”

People say that investing is risky. When they hear the word – invest, they usually think that it is another synonym for gambling. While there are two words that mean the same thing in English Language, investing and gambling definitely do not mean the same.

There is no certainty in gambling; only increase the odds in your flavor…

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When it comes to analyzing the value of an asset, for example, stocks, ideas of discounted cash flow, competitive advantage of a business and whether the prices are reasonable enough came to mind. However, when investing in a particular asset classes and sub classes as a whole, you need some other perspectives that will assist greatly in generating higher returns and further reducing risk. These additional mental models include social conditions, market cycles, worse case scenarios analysis, financial analysis and financial market analysis.

When considering investing in any of the major asset classes, it will be wise to…

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This is a personal finance blog and since a personal computer is an indispensable tool nowadays, almost everyone needs to have a workable computer at any one time, it will be good to offer some personal opinions regarding PC purchase. Earlier I mentioned that the more economical life cycle for buying a personal computer is every 5 years and not 3 years, at least for the majority of us. The reason being that after the Pentium 4 generation, hardware technology advanced faster than software requirements, with the exception of first person shooter games that always require the latest…

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“I’d be a bum on the street with a tin cup if the markets were efficient.”

In both academic environment and investment world, there is this efficient market hypothesis which states those stock markets and any other prices on traded assets like bonds and property is also efficiently changes to reflect the true value of the assets. But there are a number of reasons why stock market is always inefficient and why it will remain so in future.

1. 90% of trades, buying and selling is done by institutional investors

These institutional investors include banks, insurance companies, pension funds, mutual…

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For almost every field of studies, from engineering to businesses, there exists the need for acquiring some basic concepts to apply them in suitable situations for that field. In the field of investing and asset allocation, there is no exception also. The following concepts are required to know if one were to manage own portfolio of assets better, detailed mathematical operations of calculating them will be beyond the scope of this blog post or that they are easily available by the links referenced below. While it is a fact that when it comes to Warren Buffett value investing…

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When it comes to investing, knowing how to measure and what to measure is needed in order to know how well you do and whether the specific actions taken leads to desired results and if no, why not. While it is a fact that past performance does not equal future results, that is a pretty common saying in finance literature anyway, ordinary investors can nevertheless gain insights, subsequently derive expectations that can be reasonably achieved, so as to build sound and effective portfolios from wise analysis and study of various assets’ historical rates of return data that is available publicly…

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