I continue on my deep dive into figuring out what drives stock prices by looking at the one metric the rules them all and factors into every investment decisions we make. There are numerous mechanical and technical methodologies and strategies that are available to us when evaluating investment opportunities. At the end of the day all that due diligence may go for naught when we bring in this important metric that drives stock prices.
For most people investing revolves around the application of rules. Buy stocks with P/E ratios below X and have Debt/Equity ratios below 0.5. Index investing is better than active strategies, which is better than value investing. The reality mechanical strategies work until they don’t. In the third of our five part series, I dig deep further to look beyond mechanical investing strategies and examine the importance of how tendencies, principles, and to a certain extent fate, play critical roles in the setting of stock prices and how we frame our investment decisions. I also look at how we react to what market does, can also be a critical factor to setting stock prices and what investing competencies we need to develop to manage these tendencies to make more successful investment decisions.
With commodity prices including copper falling, I thought it might be a good time to take a look at some copper stocks. Southern Copper was one I've owned in the past so I thought I'd check in and see if there may be an opportunity to buy in.
Yes it been a full 4 years since I opened up my Robo Advisor account. For those new to investing, a Robo Advisor is a new wave of wealth management companies that invest on behalf of others using an online platform and a combination of algorithms and computer coding to buy and sell specific investments and manage portfolios. Four years ago these firms were just stepping into the investing conciousness, but since then they have mushroomed and even traditional investment companies are now offering some flavor of online investment management services. It all seemed quite appealing however there was one thing that many marketing materials, blogs, and mainstream media was avoiding (and still are I might add)…do these types of services make money for investors?
Since no robo advisor company back then was interested in disclosing their performance (they still avoid it) other than citing research that their strategy is superior, I decided four years ago to try an experiment and find out for myself. I setup an account with one of the big Robo Adviser firms. My goal was to go through the process and blog about my experience and more importantly, the results. I’ve always said that we need a good five years to really get a handle on how effective these services are compared to traditional wealth management services. Well, we’re at the 80% mark of my ROBO journey, so let’s check back in and take a look at how it’s doing now and see if we can squeeze any conclusions about the service.
One of my motivations as an Investment Coach is to make people more street smart when dealing with the investing industry (banks, mutual funds, wealth management companies, brokers, robe-advisers etc). Even though more people today are investing on their own, the reality is you cannot invest in a bubble, and whether you go the Do-It-Yourself (DIY) path or work with someone, you will still have to work with the industry. You have to co-exist with them.
So loyally and faithfully we will march into our local branch (or lounges), or a financial adviser’s office, or a Starbucks and begin the dance. The thing is before you even make contact they have you sized up.
They think you’re an idiot and they are going to go out of their way to make you feel like one.
The industry has developed a rather air-tight formula for getting us to shell out our hard earned savings and the core component of their value proposition is to make us feel inadequate or give us a bad money image. In this episode I will share with you this formula and give an example of this ritual and more importantly how we can overcome these negative connotations they are projecting to us.
Happy New Year indeed! It seems like many investors are more than happy to turn the page on a new year and fast!
So much for the Santa Clause rally. The markets continued to roll over as 2018 wound down. While it will definitely crimp some of my returns for the year. I actually viewed it as an opportunity to do some Christmas shopping. This is the type of shopping I like where the money I spend on high quality assets that will have a good chance of growing into more assets in the future. The core tenant of investing is to buy low and sell high. The times where you can buy low are unfortunately when the market is cratering. The later part of the yea is a usually quiet period for making decisions but this year some companies that I really never would considered in the past because they’ve been just too expensive looked very appetizing to pick up on the cheap. So I made a fair number of investment decisions in November and December. I bought small positions, because given the negative sentiment in the market, I wouldn’t be surprised to see prices fall further, which is fine because I’m happy to slowly build up these positions at a lower price point.
So in this first of two posts, I share with you my investment decisions from November 2018. In part 2 I will review my decisions in December 2018.
Sold shares in Starbucks (Ticker: SBUX) for gain of 29.6%, net FX)
Bought more shares in Activision Blizzard (Ticker: ATVI)
Sold shares in Activision Blizzard (Ticker: ATVI) for 25% Loss – Net FOREX
Bought more shares in Electronic Arts (Ticker: EA)
Sold shares in Walmart (Ticker: WMT) For 20% gain (net FOREX)
Bought more shares in iShares Germany ETF (Ticker: EWG)
Throughout the year I’ve shared with you the investment decisions I’ve made. It’s important to me that as someone that teaches people how to make better investment decisions, that I model the concepts and principles I teach. Well it’s that time of the year where in this episode I walk it back and see what I did right and more importantly what I did wrong…and what if anything did I learn from the experiences of the past year that will help me become a better investor?
With Emerging Market stocks taking a hit, I thought it would be a good time to explore building up a position in the sector. In this episode I evaluate several ETF's to determine which would be an appropriate one to add to my portfolio.
It’s a golden age for investors. Never at any point in history has it been this cheap to get into investing. Management fees and trading commissions have been falling over the past 20 years, thanks mostly to technology which have improved speed and efficiencies of transactions. In the last year or so, the competition over lower fees has been quite intense with ETF companies like Vanguard and Blackrock going back and forth lowering fees to almost zero. This has trickled down into traditional investment products like mutual funds which have lowered their fees, albeit less aggressively. Well the race to the bottom in fees has reached a new level.
Free. As in nothing. Nada. Rien.
It’s a great time to be an investor. Eliminating a focus on fees can allow more due diligence on the investment itself, however I’ve been wondering if these products and service offerings are really free and is free in the grand scheme of things a good thing for investors? In this episode I dive into the the illusion of free that the investment industry has been pushing on us.
In Part 1, I shared some thoughts on a recent report by the Ontario Securities Commission (OSC) outlining the challenges the financial services industry is having in getting Millennials to invest. The OSC report had a great opportunity to address those investing pain points, but like so many financial literacy initiatives, the messaging is not clear, consistent, and understandable. The report identifies solutions, yet they are separate and not integrated and use a lot of industry jargon that people just won’t connect with. They emphasize processes over results. What is the outcome we want Millennials to achieve with investing?
In this episode, I’d like to share from my experience as Investment Coach and as someone who works with people to develop their investing competencies, some ideas that I found have better motivated people and not just Millenials into become more engaged with investing. They address the pain points people have with expressed about investing which include; being scared of investing, feeling overwhelmed by the process, feeling paralyzed when trying to make a decision, and not knowing how to start and take that first step. These are my takes and perspectives. They are by no means the most definitive and all encompassing.
My motivation in starting my own practice to teach and engage people on investing revolved around financial literacy. I thought that if I could improve someone’s financial literacy, they will have a better chance at becoming a successful investor. I was always a big supporter of financial literacy programs, especially in schools. It made sense and I thought it was the right thing to do.
The reality is over the years I’ve learned and witnessed first-hand that while noble and done with good intentions, financial literacy programs just don’t work. A revolving door of programs, a lot of them government and industry sponsored have been rolled out over the years, starting out with enthusiasm and then just petering away in obscurity. Here in Canada, we even have a Financial Literacy Commissioner that acts and cheers Canadians into becoming more financially literate, but to no avail. So much effort, again all with good intentions, has been put into improving financial literacy but it just doesn’t seem to stick.
So queue the latest attempt at cracking the financial literacy daVinci Code. A 42-page report commissioned by the Ontario Securities Commission and prepared by a dream team of consultants and personal finance thought leaders. The report attempts to answer why people, specifically Millennials are not investing and what financial institutions can do to get them to invest. In this first of a two part series, I walk through the report and highlight some of the good points as well why the industry continues to make the same mistakes when it comes to engaging people about investing. In Part 2, I offer some some solutions that I have developed from my own practice and from my own experience helping people make more successful investment decisions.
I continue on with my analysis of video game stocks with a quick dive into Take Two Interactive. They are known for their Grand Theft Auto franchise.
MGM has not been on my watchlist and I really wasn't thinking about getting into casino stocks but a recent Supreme Court decisions that essentially legalized sports gambling in the US I thought was a game changer movement that could really put gaming companies in a strong position to move. I did a quick scan and MGM appeared to be not the most producing gaming company but what drew me was management's foresight to build out sports betting platforms and services in the anticipation of the legalization of sports betting. In this episode I do a quick deep dive that lead me to the decision to buy some MGM stock.
In Part 2 of my Investment Decisions series podcasts for March, (iTunes, Google Play, podcast, mind map video) I walk through the thought process that led me to my decision to buy some shares in Big Lots.
After the mini-meltdown in early February, stock prices boomeranged and made back a good chunk of their losses. In some cases the bounce was pretty big and it forced me to make a few decisions. There were a few days where the market tanked pretty big and I used them as opportunities to open some new positions. Like the previous month, I've decided to break down my decisions into 3 parts. In this post episode (blog post), I will review my decisions to buy more shares and sell some shares. The other two episodes will focus on my decisions to buy shares in Southwest Airlines (blog, podcast, mind map video) and Big Lots (blog, podcast, mind map video).
RANT ALERT: Another annual Real Estate Wealth Expo has made its way through my home town. This year some serious star power was on display. Baseball players, Pop Musicians, and Dragons were regaling attendees and their slightly open wallets with tales of how to escape the rat race and live the 6-49 lifestyle. People leaving these events usually seem to feel they are on their way to financial independence or at the very least got a good cardio workout. Unfortunately the whole thing is a scam. My rant is not about the concept as Real Estate Expos like this are just the latest iteration of get-rich-schemes that prey upon the gullible. What got me concerned was the response by people, especially on social media.Read More
It seems any conversation about stocks these days involves something about Amazon or Apple or Facebook. I remember back in the day when it was Walmart and Microsoft that were the toast of business. Like Microsoft and Apple, they were deemed to be indestructible and now even though they are still significant businesses, they don't carry the same level of cache. What happened to Microsoft and Walmart was nothing different for most companies. Companies, especially dominant one's lose their some of the mojo or comparative advantage. In this episode I share some of the reasons that cause companies to regress. They are worthy of keeping them in your back pocket if you are evaluating any of the big companies.
In the second part of my review of Morgan Housel's terrific presentation at the MicroCap Leadership Summit, I share his takeaways on the remaining two historical cases he cites that can teach us a lot about investing (Part 1 here - iTunes, Google Play). In this part of his presentation he talks about State of the Union speeches and the Wright Brothers.
I have to be honest, I'm getting a bit of bro love for this Morgan Housel of the Collaborative Funds. He just keeps hitting his blog posts out of the park. I may be projecting a bit of Confirmation Bias here and I'm fine with it because go to the heart of what I do as an investment coach. I've referred to his posts many times here and I recommend you check out his blog. A lot of times, we can learn more about something when we view them from a totally different perspective. Housel demonstrates this in an excellent presentation he delivered at the MicroCap Leadership Summit where he examined 5 seminal events in history and parsed out some takeaway learning points that can be applied to the investing realm. It's a fantastic presentation full of learnings and I wanted to share them with you. It turned out there was so much insights to gain, that I had to break the podcast down into two separate episodes. In Part 1, I offer some takes on his cases involving nuclear power plants in Austria, the war on cancer, and 9/11.
Three years ago I decided to try an experiment. I setup an account with one of the big Robo Adviser firms and invested $5000 of my own money into it. My goal was to go through the process and blog about my experience and more importantly, try to find if using this type of service can generate better returns than if I did it myself or used a traditional adviser. I said that we need a good five years to really get a handle on how effective these services are compared to traditional wealth management services. Well, we’ve now crossed the 3-year anniversary of my ROBO account, so let’s take a look at how it’s doing now.