Exciting new technologies, and the companies that create them, seem like obvious investment opportunities. Why wouldn’t you want to invest in the companies leading a new world-changing technological paradigm? Each past technological revolution has changed the world in profound and distinct ways, but their relationship with financial capital has been remarkably consistent. While we can’t predict how emergent technologies will change the world, we can draw insight from how financial markets have behaved through past technological revolutions. A technological revolution is a big deal. It moderni ..read more

Are you wondering how the upcoming U.S. presidential election might affect your investments? This is not a new kind of concern. Elections are stressful times, and the heightened rhetoric from across the political spectrum doesn’t help. With so much at stake, it may seem obvious the outcome could impact the stock market. I cannot turn down the volume, nor am I going to take a political side. But I can tell you what the data say about the relationship between U.S. presidential elections and U.S. stock markets. Bottom line, what may seem so “obvious,” may not be. Not even when the election could ..read more

Depending on how you look at it, it’s actually much easier than I routinely propose to beat the general market year after year. Just look at the largest of the large-cap growth stocks: Facebook, Apple, Amazon, Alphabet, Microsoft, and Tesla. Tesla aside, the other five are by far the biggest companies in the U.S. market, currently making up nearly 20% of it; Apple alone represents around 6% of the U.S. market. And for the five years ending July 2020, an equal-weighted portfolio of these giants would have more than quadrupled in value, shooting out the roof and leaving a total market index fun ..read more

Stock prices reflect investors’ expectations about future profits and risk. When those expectations change, as they do frequently, prices change, and they can change dramatically. Volatile stock prices do not mean that the market is broken or that the world is ending; sharp price declines are expected from time to time in an efficient stock market, and their inevitability should be built into every investment plan. I think that most people understand this, but there’s a problem: every market drop feels different. There is always a narrative, and the narrative is often scarier than the drop it ..read more

Stock prices have fallen recently and we wanted to touch base. Figuring out how the economic impacts of a global health crisis will play out is a challenging task. The market has responded by pricing in lots of new known information and lots of big unknowns. Uncertainty increases risk, driving down asset prices, and driving up expected returns. Periods like this are expected from time to time but they are also painful to endure. What should you do? Try not to worry. There is nothing wrong with feeling stressed – market drops never feel good. But remember that you have a plan and the pla ..read more

Gold is often touted as a safe haven to protect you from inflation, market crashes, anarchy, and even the collapse of fiat currencies. It’s often cited as having a negative correlation with stocks and a positive correlation with inflation, making it sound like an excellent diversifying asset to hold in your portfolio. Sorry, but in today’s Common Sense Investing, I am going to tell you why gold’s glitter does not earn it a place in your portfolio after all. It may work well as a wedding band, but it doesn’t cut it as an investment. Gold: What’s It Worth to You? Any investment can be placed in ..read more

Is a higher paying job with longer hours worth it? How should you prioritize saving for the future against enjoying life today? Should you rent or own your home? Does it make sense to pay for a house cleaner? Is it better to live in a bigger home with a longer commute, or a small home close to the office? Is going out to dinner a waste of money? Is an expensive vehicle worth it? The answers to these questions are often delivered to us on a platter by our System One brains; our fast, intuitive, impulsive, and emotional thought processes that run automatically with relatively little effort. Unf ..read more

When you see funds performing monumentally well, you may feel regretful for not investing in them earlier. There is, however, a long history of funds that skyrocketed only to have major falls from grace a brief period after. The bulk of today’s episode is spent exploring this idea in the portfolio topic section but before getting into that, we kick the show off with some updates. We begin by talking about the GameStop short and whether this casts any new light on the concept of market efficiency. From there, we take a look at some recent news, particularly one story about the meteoric growth ..read more

Since 1996, Jay R. Ritter has served as the Joseph B. Cordell Eminent Scholar in the Department of Finance at the University of Florida’s Warrington College of Business. Prof Ritter is known as “Mr. IPO” for his work on initial public offerings. During 2014-15, he served as president of the Financial Management Association. Prof. Ritter has been a trustee of a mutual fund, and a consultant for companies on valuation and financing decisions. He has also worked as an expert witness for government agencies and law firms, and is frequently quoted in the financial press. Watch this conversation on ..read more

Before I describe what constitutes good financial advice, let me start with what doesn’t. When I say that investing has been solved, I am, of course, talking about low-cost index funds beating most other investing strategies over most time periods. Academic literature going back to the 1960s has consistently found that trying to beat the market index is a losing game on average. Most investors are best-served owning the market and keeping their costs low. The post What is (Good) Financial Advice? appeared first on PWL Capital ..read more