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Is it better to save more or earn more?
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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?
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A Case Study on Tariffs
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The 2024 presidential candidates have been floating new tax proposals to address the rapidly expanding federal debt. Former president Donald Trump has proposed imposing a tariff on foreign imports to help fund the government. Tariffs are usually favored by domestic manufacturers and labor unions because they increase the price of competitor’s products. However, there is
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How Peter Lynch One-Upped Wall Street
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Peter Lynch was one of the most successful stock pickers of the 20thCentury. From 1977 to 1990, his Magellan Fund had an average return of29%. Just let that soak in for a minute: each $1 put into the fund in 1977 would have grown to over $27 by 1990! In his book, One Up On Wall
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Options Trading Not a Star Strategy
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The general public has become more familiar with options trading thanks to Keith Gill’s trading in GameStop (GME), which made him millions of dollars in a relatively short amount of time using the market equivalent of lottery tickets. While options can generate outsized returns, they can also lead to wealth destruction. Options can be thought
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T-bills for short-term savings
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Berkshire Hathaway had their annual meeting yesterday, and Warren Buffett disclosed that the company may have upwards of $200 billion in cash at the end of Q2. He also mentioned using 3- and 6-month Treasuries. T-bills and short dated government bonds are the best way to manage large cash positions like that of Berkshire due
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Expand your investing ability through limit and discipline
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Many people think that limits and discipline box you in and, well, limit you. Nothing could be further from the truth. By limiting the entire universe of investments and narrowing things down to just high and sustainable return on capital companies, you limit the universe of investment possibilities down to a much narrower list, true.
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The Gordon Growth Model and What It Says About Return on Capital
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We looked briefly at return on capital and examined how high return on capital companies can produce high returns for the investor. Now I want to delve into this a little deeper. It is well known that the true value of an asset is the net present value of all future cash flows the company
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How to Select High Quality Companies for Investment
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We have now introduced our methodology for investing and explained why we want to go for high quality companies with sustainable high returns on capital. Depending on your level of expertise and desired effort, you should select from index investing (lowest effort), dividend growth investing (moderate effort), and star list investing – investing from your
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A Case Study in Valuation and Its Effects on Investment Returns
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In the last post, we looked at the importance of investing in high quality businesses with durable returns on capital. In that post, we mentioned not needing to depend on valuation changes to make a bundle of money over your investment lifetime. You do hope to buy companies at low valuations, but you do not
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A Case Study in Return on Capital and High Quality Businesses
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Now that we have examined a hypothetical 4 stock portfolio formed using quality as an assessment, we see that quality stocks can perform well even when handicapped (I picked 4 stocks in 1985 that were due to have one or more significant issues over the years between 1985 and 2023). This outperformance is despite the