The US Presidential election is fast approaching. It is worth asking whether investment returns vary in predictable ways or are especially risky at such times. Perhaps we should be taking some action? One might imagine presidential elections to have both short-term and long-term effects on the stock market. The short-term effects would reflect the impact [Learn more…]
Investment Strategy
What President Donald Trump Might Mean for Investment Returns and Investing
Trump’s unpredictability is likely to lead to greater market volatility. Historically, the stock market and the economy have performed better in Democratic administrations than under Republican presidents. If enacted, specific Trump policies could have both negative and positive implications for the economy, for corporate profits, and for short-term stock returns. Many, but not all, of [Learn more…]
Investment Returns – How to Calculate Return
First, we saw how we could use holding period return to calculate the return of a simple investment with two cash flows, one at the beginning and the other at the end of the period. Next, I introduced the concepts of time-weighted return (“TWR”) and money-weighted return (“MWR”), the two preferred methods used by investment [Learn more…]
Understanding Your Returns – To weight time, or to weight money? That is the question.
In my previous article, I introduced my friend Tim who wanted to know how to calculate his fund’s performance. I described the simplest method of calculating returns, holding period return, which is just the percentage change in value of an investment over time. Holding period return has limited value, however, since it assumes that all [Learn more…]
Brexit and Your Investments
The long-run economic impact on investments of Brexit is likely to be small, and the United Kingdom will be most directly affected. Stock investors are likely to experience increased volatility as the details of the new agreement between the United Kingdom and the EU are hammered out. Bond investors will likely experience a longer period [Learn more…]
Understanding Investment Returns, Part 1
A friend of mine, I’ll call him Tim, emailed me a few months ago with a seemingly simple question. He read in the newspaper that one of his funds had returned 0.6% the previous year. He didn’t understand how this was possible since, according to the article, most of the underlying stocks in the fund [Learn more…]
How to Become a Better Investor Than You Think You Are
A recent New York Times article by Gary Belsky suggests some reasons “Why We Think We’re Better Investors Than We Are.” Belsky lists a series of attributes that we all share. These biases affect all parts of our lives, but they have special impact on our financial decisions: Attribute: Overconfidence We think that we can do [Learn more…]