Studies of Life

Learning by doing.

Category Archives for: Investing

Factor Portfolio Test for 2017: A Sun and its Satellites

03 February 2017 by Jim

(Picture by Steve Snodgrass)

Another year has gone by, and I would like to give an update on my personal stock portfolio. I currently think that index investing is the smartest choice, and that is why 75% of my portfolio is made up of index ETFs. However, a part of me continues to think that if you try to invest intelligently using a portfolio that is different from the overall market, you should be able to do better than the market. Maybe a few more years of dabbling and getting subpar returns will cure me of this illusion. For now, I’m not yet fully ready to accept that index investing is the best anybody can do. Not because I’m greedy and dream of making 20% ROI per year, but because I think that it should be possible for a rationally thinking human to be better than average. (more…)

The Risks in European P2P Investing: From 20% to 10% and then 5%

18 November 2016 by Jim

(Image by InvestmentZen – www.investmentzen.com)

I am an investor in P2P loans in Europe. I started out with Bondora in 2014, and after burning my fingers there, I moved on to seemingly safer alternatives, including Twino, Mintos, ABLRate, SavingsStream, FellowFinance, etc. Many people scared by what happened at Bondora will have made the same journey.

What went wrong with Bondora you might ask? Well, misaligned incentives for one thing, and shoddy management decisions for another. The platforms basically promised 20% ROI per year, which was – with hindsight obviously – excessive. They have since revised this figure. Also, they tried to hide data by changing the way that statistics are displayed on the site constantly. None of that builds trust.1 (more…)

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

30 April 2016 by Jim

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

16 January 2016 by Jim

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

13 January 2016 by Jim

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?

17 December 2015 by Jim

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?

05 December 2015 by Jim

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

08 November 2015 by Jim

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…)

A conditioned investor is not the same as a wise investor

05 October 2015 by Jim

I’ve stumbled across an excellent article on the Philosophical Economics blog.

Instead of just collecting interesting investing articles in my notes (Evernote) as I did until now, I think it is more worthwhile to actually use the knowledge gained from my reading and ruminations to create a kind of personal guidebook for investing.

I will maintain an essential reading list here on this site for anybody who’d like to read some good articles or books on the topic of investing, alongside a short commentary on each so you can easily figure out of an article or book is for you. (more…)

A Very Bad Trend in Bondora’s Platform Statistics

16 September 2015 by Jim

I’ve been looking through the forums on Bondora, and a post from carlos caught my attention.

What is it about?

Basically, the platform statistics show that the amount of money lost in defaulted (=more than 60 days overdue) loans is approaching the total amount of interest paid out, as can be seen here:

If this is true, and we assume that defaulted loans barely recover any money, then that means that on average, most investors on Bondora are not making a lot of money.

I personally treat my defaulted loans like write-offs that I will never recover. At most, I would expect 10-20% of the defaulted amount to be recovered sometime in the far future. (more…)

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