Uncertainty itself is a rare certainty in investing. Tim’s corporate finance professor at Columbia once invited legendary investor Howard Marks, founder of Oaktree Capital, as a guest lecturer. Marks shared that “dealing with risk and understanding where we are in the cycle are really the two keys to success.” Market cycles, the booms and busts, present an ever-present risk to your portfolio. Each cycle may be different in detail, but…
August 1, 2023
Several men are in the locker room of a golf club. A cell phone on the bench rings and a manengages the hands-free speaker function and begins to talk. Everyone in the room stops to listen. Man: “Hello?” Woman: “Hi, Honey; it’s me. Are you at the club?” Man: “Yes, I am.” Woman: “I’m at the shops now and I’ve found this beautiful leather coat. It’s only $2000. Is it…
No one is born an Investment Wizard. Nature doesplay its part (i.e., Wizards all likely have at least average intelligence), but it is nurture that makes them exceptional investors. You do not need to be a genius to be good at something; you just need to focus and put in the work. Buffett’s business partner, Charlie Munger, puts it this way: “The only way to win is to work, work,…
June 28, 2023
In his book Outliers, Malcolm Gladwell introduced the concept of the “10,000 hours rule,” pointing out that The Beatles put in an estimated 10,000 hours of practice playing in Hamburg in the early 1960s, Bill Gates put in 10,000 hours of programming work before founding Microsoft, and the most talented violinists put in 10,000 hours of practice by the age of 20. By dedicating significant time to their studies, these individuals…
June 27, 2023
John Clifton “Jack” Bogle was founding CEO of the Vanguard Group, the biggest investment management fund with $5 trillion in assets-under-management. Bogle has penned 12 books, with his best-selling Bogle on Mutual Funds praised by Warren Buffet as the “definitive book on mutual funds.” The father of modern-day index funds, Bogle’s company and philosophy has put billions of dollars back into investors’ pockets. Bogle was named one of Fortune’s “Giants of the…
May 30, 2023
Here’s a simple anecdote about Howard Buffett and Warren Buffett that can encourage parents to teach their kids about investing: When Warren Buffett was just a boy, his father, Howard Buffett, gave him a book about investing. Warren was immediately fascinated by the subject and started to devour more books on the topic. Howard recognized his son’s interest and encouraged him to invest his money, starting with small amounts. One…
Investing Wizard Benjamin Graham introduced the famous allegory of “Mr. Market” in The Intelligent Investor to demonstrate how the unreliability of market emotions can help contrarian investors: Imagine you’re business partners with a very unstable guy called Mr. Market. Your business is worth around $1000 per share. Every day, Mr. Market offers a price to buy your shares or sell his shares of the business. Sometimes, Mr. Market is in a great…
May 16, 2023
Recently, we posted a piece discussing just how hard it is to time the markets. However, let’s say you’re committed to mastering market timing. You’ve read all the forewarnings, done your research, but think you have what it takes to achieve this difficult feat. Exactly what does it take to time the market and how do you go about doing it? To answer that question, we look to the advice…
May 16, 2023
Why is it important that an investor begin investing early in their lives? Richard Russell (1924-2015), one of the most influential financial writers of modern times, gives a convincing answer with the hypothetical story of Jack and Sally. At 19, Sally makes the decision to open an IRA account. She invests $2000 annually until she turns 26. After this seven year period, she stops contributing to the account. Jack, also…
May 8, 2023
Investor Jeremy Grantham believes that individual investors have two advantages over professionals: they don’t have to worry about protecting their job or business risks, and they don’t suffer from over-management caused by the need to appear busy. Unlike professionals, individuals don’t face the threat of losing their job due to underperformance or criticism for not taking action in a slow market. Grantham advises that individuals can benefit from waiting patiently…
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