Studies of Life

Learning by doing.

Category Archives for: investment

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…)

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…)

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 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…)

Markup / Discount levels for Selling Overdue Loans on Bondora

16 August 2015 by Jim

One of you guys recently sent me a link to a very interesting website (http://bondpicking.com/) that allows you to see charts of the different Bondora loans that were sold on the secondary market, and at what price (XIRR or markup / discount) they were sold. They look like this:

All ratings Bondora chart

Using the current average markup, displayed in yellow on his site, I put together a table of what the average markup currently is. In order to effectively sell, I added 10% to that markup in each case, because it’s just an average, and some loans are more expensive when they’re sold. The table is below. It’s basically -14% for HR, -12% for C-F, -9% for B and -4% for A. (more…)

End of the Strategy Test 2015

12 July 2015 by Jim

This is the 6th completed month of testing a few different portfolio strategies as explained in this post. Time for a new update!

Sorry for not having published an update in May. I had exams to pass and was pretty busy overall, and when I then ran into trouble with the update I decided to wait until I’d have more time and peace of mind.

So there’s been a problem recently. The website I used to track the portfolios for these posts, Google Finance, somehow didn’t work properly anymore, maybe for reasons of currency conversion or others, I honestly don’t really know. My results were widely off the mark of what they should have been in most portfolios, and it was bad enough that I could not be sure that the data for the next updates would be correct, so I decided to instead stop it before the results were watered down by approximate data points. (more…)

Investing can – and should – be simple!

15 May 2015 by Jim

I am into reading and learning about investing, and obviously you, my reader, is to, otherwise you wouldn’t have found this blog. And while it is fun to talk about how different investing strategies do, and what the ‘best one’ out there is, it is important to not loose sight of the basics. We tend to get caught up in minor details. Of course, when people talk about money, most want to get the highest possible return.

But peace of mind is also worth a lot.

After all, for many people, more money is the same as peace of mind, because it means they don’t need to worry about losing a job, paying their bills or defaulting on their loans. (more…)

Strategy Test 2015 – 5: April 30

04 May 2015 by Jim

This is the 4th completed month of testing a few different portfolio strategies as explained in this post. Time for a new update! 

 The beginning of the year looks very good so far. One interesting aspect is that the different portfolio strategies do not diverge by a lot from each other, which is surprising to me. There is no big loser here, and no crystal clear winner.

What does that mean? As they say, ‘a rising tide lifts all boats’, and if stocks in general are booming it’s hard to find a stock strategy that doesn’t work well. The devil is in the details. (more…)

How not to invest on Bondora

03 May 2015 by Jim

I’ve been investing in Bondora for over a year now, and the new risk rating system implemented at the end of 2014 really seems to work. Unfortunately, I made a mistake. I invested almost the entire amount I allocated to Bondora in 2014, as you can see here:


I unfortunately loaded up on a lot of bad-quality loans for this reason, and once the new risk rating system showed up a large part of my portfolio was HR and more and more loans became overdue.
I reacted to this by trying to sell lots of HR loans to get rid of them before they became 60+ days overdue. As you can imagine, it’s difficult to sell such loans, so I had to offer discounts. Steep discounts. And I lost quite a bit of money doing that. So I now have quite a few defaulted loans. Have a look: (more…)

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