Are Buybacks Good For Stocks And Investors? Buybacks And Stock Returns

To buy back shares is one of five opportunities a company has for allocating the company’s capital and rewarding shareholders. Paying a dividend is far more known, yet companies have since 1997 spent more money on buybacks than dividends. How the company allocates capital is the main determinant of future stock market returns. Are buybacks…

Why Warren Buffett Recommends Index Funds (Passive Index Investing)

Warren Buffett recommends most investors to invest in passive index funds. In general, investors should not be active investors. Why? Buffett recommends passive and low-cost index funds because he believes this is the most rational way to invest for most people. There are so many forms of mistake ordinary investors can make, but passive index…

Is Bitcoin A Better Investment Than Stocks? (Productive vs Unproductive Assets)

Bitcoin has appreciated a lot over the last years, and polarized discussions on social media continue endlessly about which asset will perform the best in the future. Many swear to bitcoin and cryptos, while others swear to the more traditional assets like stocks, real estate, and gold. This article looks at productive vs unproductive assets….

How To Protect Your Capital And Savings Against Inflation (Money, Investments, and Savings)

Since the early 1980s inflation has been falling, at least according to official numbers. As a result, the interest rates have dropped significantly, even to nominal negative rates in some countries. Because of this, a whole generation of investors have never invested in an environment with rising inflation and don’t know how to protect their…

Experience, Age, And Wealth Determine Your Stock Market Performance

A recent study about Norwegian traders and investors sheds some light on the returns (or lack of) based on diversification, age, wealth, and risk appetite. It turns out that wealth and age are a major contributor to returns, perhaps not surprisingly: The tilts of investor portfolios toward the new factors are driven by wealth, indebtedness,…

How To Find Multibagger Stocks (How To Analyze Multibaggers)

Many investors are obsessed with identifying future multibaggers. How can you find multibagger stocks? Unfortunately, it’s not easy. In this article, we look at a specific research report that addresses how to find multibaggers. Where and how can you find multibaggers? The main takeaways from the report are that the Nordic region is a great…

Why Shorting Is Risky (Why Short Selling Is Difficult And Why You Shouldn’t Short Stocks )

Recently the short squeeze in Gamestop and some other stocks have attracted a lot of media attention. Of course, the action in Gamestop is sheer speculation and most likely a short attack on stocks with limited float and high short interest. This is expected to continue for some weeks, and some hedge funds are likely…

An Investment Checklist Example (Why You Should Have A Checklist)

An investment checklist is handy no matter your time horizon or investment style. The bare minimum is a mental checklist, but preferably it should be a written one. Just like the aviation industry developed checklists to avoid disasters, investing is very much about error removals. This article provides an investment checklist example and argues why…

20 things you should know about Peter Lynch and his investment strategy

Peter Lynch is one of the greatest investors of all time, and for good reason. His investment strategy has been successfully applied by countless investors, and his success as an investor is legendary. The Peter Lynch investment strategy is based on the simple principle that investors should invest in what they know. This means that…

Why It Is Important To Avoid Investment Mistakes (Remove Unforced Errors)

The good is mostly in the absence of the bad. – Old proverb, mentioned in Nassim Nicholas Taleb’s Antifragile. Why is it important to avoid investment mistakes? Put simply, if you avoid the gravest mistakes, winning tends to take care of itself. Avoid unforced errors In 1975 Charles D. Ellis wrote a famous article in…

How To Hedge Against Tail Risk In The Stock Market (Tail Risk Hedging Strategies)

Tail risk is a form of portfolio risk that arises when the possibility that an investment will move more than three standard deviations from the mean is greater than what is shown by a normal distribution. Tail risks include events that have a small probability of occurring, and occur at both ends of a normal…

How Did Ray Dalio’s The All Weather Portfolio Perform During Covid-19?

Ray Dalio’s All-Weather Portfolio was constructed to stand the test of time, no matter the investing climate – be it inflation, deflation, or stagflation. How did the portfolio perform during Covid-19, a period that witnessed enormous volatility? Ray Dalio’s All-Weather Portfolio performed very well during Covid-19. While the stock market dropped 30%, the All-Weather Portfolio…

Why Tobacco Stocks Outperform (Why Tobacco Stocks Are A Great Investment)

Some months ago I wrote an article about the historical performance of so-called “sin stocks”. Tobacco companies have performed the best in the US, and alcohol stocks in the UK. In this article, I briefly argue for the reasons why and why they most likely continue to outperform. Tobacco stocks outperform the market because they…

Expected Returns In A Zero Interest Rate Policy (ZIRP) Environment – Which Asset Class Is Best

The last decade has produced fantastic returns in most global asset classes (commodities excluded), helped by enormous interventions by central banks. Can we expect similar high returns in the coming decade? More importantly, what is the best asset class when the interest rates are close to zero? ZIRP – what is it? ZIRP is the…

Why Is Diversification Important In Investing? (Benefits And Advantages)

Harry Markowitz won the Nobel Prize in 1990 for his work in showing mathematically how you can both reduce risk and create better returns by diversifying across regions and assets. Risk is of course measured in volatility, ie. how your assets fluctuate in price. Such a theory was new when it was first released in…