What are your personal truths?

Note for the long-time subscribers of this blog: This post is mostly about philosophical thinking, it’s not centred on investing, so you might want to skip it if that’s not your thing. 

After reading Jostein Gaarder’s Sophie’s World, an excellent children’s book that’s also an introduction to the history of philosophy, I felt it might be quite useful to talk about a very important distinction about what truth means.

In the history of philosophy, it’s quite obvious that what is held to be true in one age or century can be deemed false a few decades later, so how much of an actual absolute truth is there really to find? Do we even have a deep, unchanging nature that philosophy can tell us about? According to French existentialist Jean-Paul Sartre, the answer is no. (more…)

How should I invest? Have a look at the Universal Investment Equation!

After my last post on switching to an evidence-based investment strategy, I continued thinking about what we could consider to be the ‘truth’ of investing, and I’ve had a sudden epiphany.

What you can see above is a very simple equation that describes what investing is about. In other words:

Capital x Time x Rate of Return = Wealth.

If you increase one of these three first factors, you increase the product, i.e. the end result. So your wealth increases if you:

  1. invest more capital, or
  2. invest for a longer period of time, or
  3. (more…)

Recalibrating to an evidence-based investment strategy

Those of you who’ve been reading my blog for a few months know that I love experimenting with stock investing strategies. While I was using the Trending Value strategy in my own portfolio, and constantly looking for a way to improve it further, I’ve begun to think that maybe the best way to improve my portfolio was not to be found in another stock selection factor, but instead in another direction.

According to many people, including the founder of Vanguard, a portfolio of passive index ETFs is the best approach for most people. I have more reason to believe Vanguard than other fund providers, because Vanguard asks significantly less for its service, which tells me it’s not in it to make a quick buck. I think Bogle really wants to educate investors. (more…)

How to Bulk Remove Your Loans from the Bondora Secondary Market

If you’re currently selling loans, for whatever reason, you can try using a specific discount / markup, and then try again with another one if it doesn’t work. Most loans on the Secondary Market sell, if at all, during the first week. So it’s no use waiting for a month.

I have quite a large portfolio of loans, most of which are HR 60+ days overdue (… don’t ask…) so I’m trying to get rid of them at VERY STEEP discounts. I had to increase them several times, and always waited for the 30 days until they were taken off the Secondary Market, to try selling again. (more…)

Does the Piotroski Score work for Large Caps too?

I got a question from a reader this week. He wanted to know whether the Piotroski score only works for Small Caps or not.

I’ve checked Piotroski’s initial paper, which you can find here, and found the following table, which sums up the main results from his research.

The Original Piotroski Results

What does the table show us?

The values in the table for the columns MEAN and MEDIAN are correlation values. A 1 means that it’s perfectly positively correlated, i.e. high Piotroski score equals high return, -1 means low Piotroski score equals low return, and 0 means there is no correlation, i.e. Piotroski score gives you no information on returns.

(more…)

How do you know stocks are in a bubble?

A reader, Algirdas, recently left several questions below a post, and I thought the answers might interest most of you, so I decided to answer with another post.

> You said: “Right now, stocks and bonds are pretty expensive. It’s not a good idea to invest all of your money into either category right now, because there could be a big decline soon” How to know when stock market reached the bubble or had a big decline? Maybe you can share a source where you can look the current stock market situation considering the whole stock market performance history? How do you know when stocks are expensive? Or in a bubble? (more…)

How to Start Investing

I’ve been asked by a reader how to get started, and noticed that I haven’t yet talked about this in a general way, because most of the posts here are about specific investment strategies. So here is a more general approach for those who are still looking at how to get started.

# Starting to invest

  1. Earn more money than you spend
  2. Save the difference so you have something to invest with
  3. Invest that money

This is the first, basic set of instructions on how to begin. Before moving on, make sure these three steps are checked off on your list. It’s no use to invest when you spend every dime you earn. Never invest borrowed money! (more…)