Since their peaks in Oct/Nov 2021, high growth stock prices have been hammered much more than the major indices. It’s typical for growth to outperform in bull markets and underperform during bear markets. As I’ve said many times, with a concentrated, high growth portfolio, one should expect at least a 50% drop at some point. It really…
Today, I heard a story that’s repeated regularly: very few professional money managers outperform their benchmark index. The study was conducted by Morningstar, and it reported that 47% of active managers outperformed their passive counterparts over the 12-month period ending on June 30, 2021. This is bad because people are actuallypaying these guys to underperform.…
Many decisions in life are based on risk versus reward. That’s certainly true for investing, or at least I think it should be true. How much can you gain and how much can you lose. Then you can layer on your assessment of the probabilities of the outcomes. Sure, you can be wrong in your…
WHY BENCHMARK In investing, a benchmark is something against which an investor can measure returns. It provides a yardstick, often to determine whether an active investment strategy is outperforming a passive strategy. Clearly, if a passive approach can’t beat an active one, then why bother with the active one? The same logic extends to hiring…
WHAT You may have heard the term CAGR. It’s an acronym for Compound Annual Growth Rate. Said another way, it provides investors or borrowers a way to compare returns of various time periods by converting them to an annualized rate that takes into account the compounding of interest or returns. WHY Practically, CAGR allows for…
MY JOURNEY TO FINANCIAL FREEDOM Those who have read my posts over the years know that I started planning and striving for financial freedom shortly after I graduated from the university. It was a 15-year journey that required planning, work, discipline, and learning, and in 2007 I decided to quit my day job. I’ve written…
This is Part 6 in a series about analyzing growth stocks. I had intended on Part 6 being about various financial and other metrics that are important for monitoring the progress of a growth company. However, when thinking about this next post, I decided to first write how to analyze a business’s progress in scaling…
I first wrote this in May 2017. I’m posting it here again to point out that getting to the truth and having a complete understanding of financial choices is a prerequisite for making informed, good financial choices. People tend to think that someone else knows more than they do. This has always baffled me. Just…
Have you ever delayed selling a stock because you wanted to wait until that stock’s price climbed back up to your purchase price? If so, you’re probably incurring a cost: opportunity cost is forgoing the next best investment. Sometimes that next best investment can be better than the one that you still own. For example,…
PREVIOUS RELEVANT POSTS My journey to financial freedom Financial freedom: how to get it The math behind getting financial freedom WHY INVEST IN STOCKS If you read the last post referenced above then you have seen how important the percentage growth rate is to growing your nest egg. Small percentage differences over a long period…