January 2019

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Elegant

This is the third in a series of posts about my investing philosophy – Elegant.  The investment process should be elegant, efficient, and low-friction. Before diving into what that means, Tadas at Abnormal Returns has collected posts that remember investing legend Jack Bogle, founder of Vanguard, who recently passed away.  If you’ve invested money in the last 40 years, you have more money in your pocket than past investors because of Jack Bogle.  Skim the headlines and pick a couple to read.  It will be worth the time. Elegant If you were to build your portfolio from scratch today, would it look like what you own right now? Are the investments in your portfolio pieces of a larger financial plan or accumulated trinkets of an investment collection? When tempted to overthink a portfolio, I remember an urban legend from the space race. While NASA spent $1 million developing zero-g pen. the Soviets…


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Focused

This is the second in a series of posts about my investing philosophy – Focused.  It can be difficult to keep an eye to the big picture without getting distracted by all the different ways to invest.  Focus is about maintaining perspective, understanding why we invest and measuring the success of those investments. Think Left of the Decimal Spend more time/energy on the things that have a true impact and less time/energy on low-impact items. It’s worthwhile to examine whether your portfolio should have a 60% or 70% allocation to Equities, but if you’re torn over adding a 0.5% exposure to a single country ETF, you’re overthinking things. This goes for all things investing. Get the big things right. Avoid errors caused by forgetting what you are really trying to do. You don’t have to be a great investor, just don’t be a bad one. Marginal Utility Understand when you’ve won the…


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Dry Powder

I’ve got some dry powder set aside for a situation just like December.  During a bear market (when the market drops 20%), the plan is to deploy half of it into equities.  The S&P 500 fell 19.4% from September through Christmas Eve.  It was chaos on CNBC.  This was the big one…  And I turned up my nose because it was half a percent short of a formal bear market.  I was not ready to buy until that last 0.6% bled away.  It didn’t hit the magical 20% number.  Since this bear kiss, the S&P 500 is up 9.6%.  Oops. Eddy Elfenbein of Crossing Wall Street (great follow on Twitter) has a quick hit this morning “What if the Bear Market is Already Over?” that is a great reminder that the market doesn’t care about our arbitrary mindsets.  Usually, I think about this in relation to the calendar.  The market…


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Risk-Aware

This is the first in a series of posts about my investing philosophy – Risk-Aware.  Risk is the permanent impairment of capital. While risk is often viewed as something that happens to a portfolio, it can also be created through the actions of a portfolio’s manager/owner. Be compensated for Risk There is no such thing as risk-less return, but there is such a thing as return-less risk. While the risks and returns of asset classes are not necessarily related, the relationships that do exist are constantly changing and not linear. Behavior You are always compensated for your behavior, especially if it is bad. Luck Luck plays a bigger role than anyone wants to admit. One aspect of luck lies within sequence of returns risk. Buying and holding a 60% S&P 500 / 40% Barclays Aggregate portfolio (60/40) would have lost 22% during the ten years following March 1999 (I am cherry-picking…


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Happy New Year

To kick off the new year, I’m sharing my investing philosophy.  Some concepts are simple while others more complex.  They are not immutable rules or laws or instructions, just context I use for investing.  Whether I’m doing due diligence on a money manager or listening to a pundit talk his book on CNBC, it’s being processed through this filter. Most of my philosophy is derived from the folks I work with.  There is a kind of collective gut feeling around most of these concepts that we have, but I like to put things like this in writing and keep it where I can see it.  It can act as a refresher (“oh yeah, that’s why we do that”) and as a record of how my thinking on investing has evolved. Investing should be done in a manner that is:     Risk-Aware – Know yourself and prepare for what’s likely.   …