Investment Strategy
We all know that we need to spend less than we earn in order to build wealth. But how about something more specific? Exactly how much do you need to save, and at what rate do you need to compound it at, in order to reach your goals? Here's a wealth matrix to help answer those questions. If you have a certain level of wealth that you would … [Read more...]
Although capitalization-weighted index funds are the industry standard, there are several advantages to equal-weighted index funds that make them worth a close look for adding to your portfolio. The main advantage, simply, is that evidence suggests that the equal weighted ones generally produce superior returns. But the reasons why are … [Read more...]
The cyclically-adjusted price-to-earnings (CAPE) ratio of a stock market is one of the standard metrics used to evaluate whether a market is overvalued, undervalued, or fairly-valued. This metric was developed by Robert Shiller and popularized during the Dotcom Bubble when he argued (correctly) that equities were highly overvalued. For that … [Read more...]
Calculating the sum of future discounted cash flows is the gold standard to determine how much an investment is worth. This guide show you how to use discounted cash flow analysis to determine the fair value of most types of investments, along with several example applications. You can either start here from the beginning, or jump to the … [Read more...]
One of the most commonly mixed-up concepts in investing is the difference between market volatility and market risk. Many people treat them identically, which is a mistake. And you can profit from that mistake. One way to look at it is this: Risk is the probability that an investment will result in permanent or long-lasting loss … [Read more...]