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One of my favorite historical investors had a rule: When profit margins are at an all time high as a percentage of GDP (they are), interest rates have risen substantially in the past few years (they have), and the stock market has reached an all-time high (just happened), it’s probably a good idea to start [...]
In the words of one famous investor, easy cash sedates reality and leads to sloppy decisions. When a business or person (witness half of Hollywood in the early, ephemeral period of their careers when money and roles are easy to land) finds themselves in the position of having cash poured on top of them from [...]
You know that share repurchases can be a great way to return value to stockholders. Yet, when management or a Board of Directors makes the announcement, that doesn’t mean you should call your broker and pick up shares. Here are three things to watch out for in a share repurchase plan: Make sure the total [...]
Hedge funds gained 5.77% in May and 10.75% for the year through May 31, according to research from BarclayHedge. “Equity markets in both developed and emerging countries saw share prices rally in May,” which had positive effects on hedge funds, Waksman, founder and president of BarclayHedge Ltd., said in a statement. All 18 of the [...]
Warren Buffett once said, “No matter how great the talent or effort, some things just take time: You can’t produce a baby in one month by getting nine women pregnant.” Yet, according to some sources, the average holding period for a common stock is only three years. Is it any wonder that investors statistically experience [...]
Risk reduction. Insurance companies do it every time they underwrite a new policy by estimating probable outcomes based on past behavior and other factors. So do restaurants and coffee shops when they hedge their costs on items such as coffee beans, wheat, and dairy products. Holding companies strive for it when they acquire businesses in [...]
Warren Buffett has often said, “I could improve your ultimate financial welfare by giving you a ticket with only twenty slots in it so that you had twenty punches – representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments [...]
Don’t confuse changes in market capitalization with the return you earn on your investment. Instead, focus on total return – appreciation in the share price plus cash dividends and any spin-offs or other distributions received. The distinction may seem small to some new investors, but the implications are extremely important. There are four primary reasons [...]
In financial theory, the rate of return at which an investment trades is the sum of five different components. They are: 1. The Real Risk-Free Interest Rate This is the rate to which all other investments are compared. It is the rate of return an investor can earn without any risk in a world with [...]
I notice that a lot of my readers were searching for this basic question of how to buy stocks, so I thought it might be useful to you to synthesize some of the great content that’s been generated over the past several years, putting it in one easy-to-find and simple-to-use location for your convenience. This [...]