Investing

2019 has been great for investors as the S&P 500 gained 8.86% so far (through 2/4/2019) in reaction to the release of my investment philosophy.  Ok, maybe there were other factors at play.  If you missed the posts, portfolios should be Risk-Aware, Focused, Elegant, and Realistic.  There were also some investing concepts that just didn’t fit in this framework, but deserve mention.  Each of these could be a post of their own, especially the hardest thing about investing. Time as a Factor Factor investing tries to identify characteristics of stocks that move up to gain an edge over market-cap based indexes.  Factor investing has gained traction over the past few years, beginning with dividend and low volatility funds.  Now most investment firms have agreed on four factors – value, size, dividends, volatility, quality, momentum, revenues, profitability, and liquidity.  Yes, that’s nine factors, but most product sellers use a maximum of…

This is the fourth in a series of posts about my investing philosophy – Realistic.  Investors should be realistic about their expectations and the nature of the markets. No one can predict the future. After hearing 10 years of “The easy money has already been made”, it’s clear that most can’t even predict the present. It sure didn’t feel easy at the time. While no one knows the returns or risks in advance, investors with a reality-based approach to investing can craft a long-lived investment process. Realistic Market Expectations Expect markets to go up over the long term. This is not optimism or a leap of faith. It’s realism. Humans will continue to innovate and seek to put their capital to work. Not every asset class will go up at the same time forever, but that’s what diversification is for – to eliminate the need to predict what asset classes will go…

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…

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…