Month: July 2024
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Understanding the Assumptions You Make is a Key to Good Investing
Many years ago, when I was undergoing my engineering training in school, the professors in several classes would require that I write my assumptions before showing the solution on homework problems. Most of us found this to be quite annoying because we were certain that the assumptions were obvious, and it just took more time and…
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A Long Term Look at Return on Capital by Industry
We have been talking a lot about how durable and sustainable returns on capital lead to superior returns over long time horizons. I thought it might be instructive to look industry by industry and market sector by market sector to learn if there are any patterns to return on capital. If we know what to…
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The Pareto Principle can improve your life
In the last post, I mentioned the Pareto principle or the 80/20 rule. This rule states that for many systems or outcomes, 80% of the consequences or results come from 20% of the causes. I see this rule all the time in my scientific research. Complex systems with many variables often have 2 or 3…
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Can You Trust the Financial Statements?
As value and quality investors, company financials play a critical role in finding great companies and knowing what price to pay for them. One question that might come up during the due diligence period is, can we trust the numbers that are being presented by the company? While accounting standards set certain requirements for financial…
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Is it better to save more or earn more?
In the quest to achieve your financial goals through investing, you will need to increase the capital base that you invest over time. So which is better, to save more of the existing money that you earn, or to earn more? Of course, the easy answer is both, but what if you had to choose? …