I have written many times before about the power of compounding. For example, even when dividend yields are small at say 2% reinvesting any dividends received over many years will multiple the yield many times over with compounding. I came across the a thoughtful piece on the magic of compounding by Richard C. Young at Young …
Market Timing can be very dangerous to an investor in terms of losing out on potential returns. I have written many articles before on the cons of market timing. Over and over again this concept has been proven wrong. For example in December 2018 US equity markets fell dramatically wiping out most of the gains …
Equity mutual funds pool together money from many investors and invest in a group of stocks. This process in theory is supposed reduce risk to investors especially the risk of owing individual stocks which can blow up. However that is not always the case. Mutual funds also have high risks and they are not necessarily …
Continue reading ‘10 Reasons Why Individual Stocks Are Better Than Mutual Funds’ »
Dollar Cost Averaging (DCA) is an investment strategy by which you invest little by little in each period instead of a lump sum in one shot. By investing small amounts say each month over many years one can reduce volatility and also the risk of heavy losses. Over time small amounts tend to benefit from …
Continue reading ‘How NOT to Demonstrate the Power of Dollar Cost Averaging’ »
On of the simplest and easiest ways to reduce risk in a portfolio is diversification. Holding assets spread across different types, classes, countries, etc. not only reduces risks but also provides a cushion to a portfolio when markets head south as we witnessed in December 2018. The following chart shows the importance of diversification as …
Continue reading ‘Asset Class Performance Chart 2005 Thru 2018’ »