“What” is Easier Than “When” in Investing

"I have no idea on timing. It's far easier to tell what will happen than when it will happen". - Warren Buffett In the beginning of 2012 , if you would have asked financial market "pundits" how the market is going to be in the next twelve months, I doubt many would have said that the market will go up by 16%. The US Presidential election campaign was in full swing, unemployment was too high, housing wasn't recovering fast enough, european sovereign debt crisis was at the forefront, and Chinese … [Read more...]

Interesting Time for Dividend Stocks

Dividend stocks are being subject to opposing forces in the market these days. On the positive side, for last few months, investors have been bidding up prices of dividend stocks so much that some folks in the industry and media started talking about potential "dividend bubble". This is a typical investment community behavior when there is a lot of uncertainties in the market and prospect of downturn in the market grows higher. So, with all the news about European crisis, US presidential … [Read more...]

Nassim Taleb Essay: Learning to Love Volatility

On Saturday, Wall Street Journal published an essay by Nassim Taleb. It is a precursor to his new book, Antifragile: Things That Gain from Disorder, which is scheduled to be published later this month. In his past books and essays, Taleb has argued about how black swan events, events that we can not anticipate in advance, impact the course of history very significantly while most of our day-to-day efforts are geared towards smaller, inconsequential tasks that we can control and feel good about … [Read more...]

Notes from the Book “The Clash of the Cultures: Investment vs. Speculation” by John Bogle

I recently finished reading the latest book by Jack Bogle -- the legendary investor who created the first index fund in the 70s and championed the indexing concept throughout his career. My thoughts The book does a great job of outlining the history of index funds. Though I don't agree with the premise that, for all investors, index funds are the best way to invest for the long-term (and, that's why we actively manage our portfolio), I will concede that, if you don't have access to a … [Read more...]

Twisted Logic of Bill Gross

Bill Gross is known as the bond king in the world of investing. His bond fund, PIMCO Total Return Fund, is the largest bond fund in the world. He is credited with coining the term for current economic situation -- "the new normal". Recently, Bill Gross wrote a commentary on US stock market past returns and expected future returns. To put things in perspective, the last time he pronounced the death of stocks was in February 2009. As Forbes reports - "...Since then, the S&P 500 has climbed … [Read more...]

Under The Microscope: Rule No.1 is Never Lose Money

In these turbulent days in the market, lets revisit a frequently quoted Warren Buffett line - "Rule No.1 is never lose money. Rule No.2 is never forget rule number one." Before we dig deeper into the quote, let me make it clear that I agree wholeheartedly with most successful investors that managing risk is job number one for a portfolio manager. But, contrary to academic view, keep in mind that risk is not really the volatility of stock price, it is the possibility of permanent loss of … [Read more...]

Under The Microscope: Concentrated Portfolios

In the world of investing, just like in the world of politics, people tend to hold strong views about what is the right way to invest. But, when you look deeper, often there are merits in both sides of the argument depending on the context. Many investors take a quote from a famous investor that fits their viewpoint and use that idea as a rule of thumb in their investing philosophy. However, a different interpretation emerges when you look under the surface and take the context of the quote into … [Read more...]

The Double-Trouble with Market Timing

It is difficult enough to be right about timing the market once that the thought of being right about timing the market twice in a short span seems like a herculean task. Consider this -- if you would have sold all your stock holdings in mid 2008 and bought them back in March 2009, not only you would have avoided the financial crisis and resulting crash, you would have made a bundle with the sharp rebound of the US equity market in last couple of years since the crash of 2008. But, those moves … [Read more...]

“Buy and Hold” = “Invest and Track”

You might have heard of “Buy and Hold” approach to investing. In a nutshell, the approach advocates that once we analyze and invest in a stock, we should just hold and own the business for a long time and due to the compounding of returns over time and absence of panic driven trades, you will realize better investment results compared to day-trading. Warren Buffett is one of the most prominent investors who is supposedly uses buy and hold approach. (though, as per his biographer, he is much … [Read more...]

Long Term Investing vs Speculation

A lot of people when they think about investing in stocks, they imagine trading stocks. So, let's try to get the basics cleared up about what I mean when I say "investing" on this site. At a very basic level, there are two distinct ways to profit from the stock market - 1) exploit the short term pricing inefficiencies in the market, 2) share a piece of the future profits of a business by buying shares of the company when they are temporarily mis-priced in the market and holding the shares for … [Read more...]