Journal to portfolio afterlife

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I prodromi del nostro futuro. Lo Stato decide per te. Naturalmente i cittadini spenderanno di meno

Germany's lower house of parliament passed a bill on Friday on phasing out oil and gas heating systems after months of wrangling, but the legislation was criticized by conservatives as too costly and environmentalists as not strong enough.

The renewable energy boiler switch requirement will not take effect until municipalities submit their binding heating plan, which is not expected before 2026 in smaller districts and 2028 in larger ones.

German parliament passes law to phase out gas and oil heating

Germany's lower house of parliament passed a bill on Friday on phasing out oil and gas heating systems after months of wrangling, but the legislation was criticized by conservatives as too costly and environmentalists as not strong enough.

www.reuters.com

 

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Un buon risultato dopo il teatrino politico americano del debt ceiling.

https://twitter.com/x/status/1700524463194870021

 

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The chart below, from First Eagle Investments, “It (May Be) a Small World After All”, shows the valuation of the Russell 2000 going back to 1997. Small caps haven’t been this cheap on an absolute basis since the Financial Crisis. They have been hovering around a Price-Earnings multiple of 11.5, compared to the average of 16.9 over the last quarter-century.

Things are even more compelling in the small-cap value universe. Using Validea’s Market Valuation tool, I’ve looked at the absolute valuation of small and mid-cap value stocks through various valuation ratios. As you can see, small/mid-cap value has rarely been so cheap (our data goes back to 2006). The other periods of this level of cheapness came mostly during the Great Financial Crisis (2008/2009) and during the COVID crash (2020).

Small Cap Value: Waiting for the Jumpstart

By Justin Carbonneau (Twitter | LinkedIn | YouTube) — Over the past few weeks, I've seen a number of charts highlighting the opportunit

blog.validea.com

 

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Truly, I believe it’s from the constant ads or always seeing our social media competition, we constantly put ourselves under pressure to be the next iteration of ourselves—or a carbon copy of the ones we compare ourselves to.

Credit Karma did a study in 2019 that revealed that 48% of millennials went into debt just to keep up with their friends.

You're Exactly Where You Need To Be - Wealth Found Me

You know that old saying, comparison is the thief of joy? Cliche and worn out, yes, but it’s one of those timeless pearls of wisdom that will always ring true. I’m 25, and I’m starting to feel like I have nothing to show for it. My Instagram isn’t perfectly aligned with food porn or my...

wealthfoundme.com

 

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Presente.

In the same way that people don’t want to physically hold gold, slipping precious metal bars under their beds, people don’t want the responsibility of holding their own bitcoin, Yanowitz says. “They don’t want to deal with that.”

Non solo, fornisce la legittimità della regolamentazione.

On top of the secure custody advantages, an ETF offers increased price transparency and discovery, “which institutions want,” he says.

Will investor behavior change once an ETF is approved?

According to long-time crypto investor Santiago R. Santos, an ETF offers tax advantages and investment opportunities like Roth IRAs.

blockworks.co

 

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Acting in haste and repenting at leisure is undoubtedly also a behavioural issue for investors. The nature of financial markets – the stories, the trends, the performance obsession – almost compels us to act immediately. Either we have no particular plan in place, or emotions ride roughshod over the plan we thought we were going to follow. So we act in the moment.
Most investors really don’t need to be acting fast, but if we do it should only be when following a prudent plan of action which is aligned with our goals.

Investors can easily forget what the purpose of their investment decisions are. We might begin with a plan to save regularly over 30 years to fund our retirement. Yet three years down the line we are revamping our portfolio because it underperformed the market over the past six months, or because of an article we saw in the weekend newspapers. Living our portfolios day to day, week to week can easily lead to us forgetting the reason that we began investing.

Do Major Projects and Investment Decisions Go Wrong for the Same Reasons?

Whether it is a simple extension being built on a house or the bold development of a brand-new railway line, we know two things: both projects will take longer to complete than estimated and will c…

behaviouralinvestment.com

 

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To make sound judgments, some amount of information is necessary. But beyond a certain point, gathering more data doesn’t always lead to better decisions. In fact, it can lead to worse results. That’s because more information can “lead the analyst to become more confident… to the point of overconfidence.” The lesson for investors: It’s important for financial decisions to have a quantitative basis. But it’s also important to avoid going too far with any analysis.

For better or worse, in the absence of a crystal ball, no amount of further analysis will get us closer to an answer. Further analysis, however, may have the unintended consequence of making us feel more confident in an outlook that is, by definition, imperfect. That’s why I recommend a different approach: If you structure your portfolio so it will meet your needs whether the market is up or down, you don’t have to worry about making forecasts.

Il classico esempio è quello del lump-sum investing, statisticamente è meglio investire tutto e subito, ma dal punto di vista comportamentale del minimization regret è preferibile entrare in più scaglioni.

When making financial moves, always look for ways to make that move incrementally. Among the benefits of moving slowly is that it’ll allow you to gather more information, not because you’ll spend that time doing more research, but because—as time goes on—more information will become available. A year from now, we’ll have answers to things that today are unknown. Two years from now, we’ll know even more, and so forth. Investors can then use that information to finetune decisions rather than needlessly belaboring decisions today.

Don’t focus on the likelihood of being right or wrong on any given decision. That’s too difficult to know. In any case, there’s almost always a non-zero chance that something might or might not happen. For that reason, Sunstein suggests never going out on a limb in forecasting the likelihood of an event. Instead, he suggests weighing the cost of being wrong versus the benefit of being right, both of which are easier to estimate without having to forecast the future.

Consider some of the frequently debated questions on asset allocation. Should your portfolio include a small allocation to value stocks or small-caps or real estate? Since past performance doesn’t guarantee future results, there’s no way to know whether any of these will add or subtract from future performance. But if it’s a small allocation, the cost of being wrong will likely be low. In those situations, where no amount of additional analysis will help you divine the future, it wouldn’t be illogical to make a decision by simply picking.

Regardless of how a decision turns out, we can almost always learn something when we spend time looking into a question. That in itself can be valuable, and it could help us the next time a similar question comes up.

How to Decide - HumbleDollar

THE CENTRAL Intelligence Agency knows a thing or two about gathering information. That’s why a CIA publication titled The Psychology of Intelligence Analysis is, in my opinion, a valuable resource for investors. Of particular note is a section titled, “Do You Really Need More Information?” It...

humbledollar.com

 

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Are there consequences to our spending actions? Absolutely. As to whether those consequences are positive or negative, that all depends on your vision for your future in comparison to your present. If your vision is you want to experience the now, being that the future is uncertain, I can understand that. Certainly, our brains are oriented far more towards the present than the future.

How does CNBC earn revenue? From advertising. Can you reasonably conclude CNBC is financial news and information presented for your benefit? Of course not. To garner advertiser dollars, that is, revenue for CNBC, they have to prove you buy stuff resulting from ads on their platform. They have a huge conflict of interest between you, the consumer of their product looking for useful information and them, the for-profit business who has to get eyeballs to get advertising dollars to be profitable.

Whether it is on your phone, on the TV, or in print, there are sophisticated and well-proven behavioral techniques at work, every single minute and day, designed to entice you to spend. All of these emotional and behavioral triggers are anything but focused on spending being non-judgmental, analytical, optimized, and/or unemotional.

If your current spending has a high probability of limiting your ability to do something in a reasonable future time period that is emotionally important to you, then you are arguably spending too much. But only if that future thing is equally or more important than the current expenditure.

Judging our spending actions, however, is of no value. Evaluating our actions, thinking through the consequences, and using that process to influence future spending decisions? Supremely valuable. This is the truth, the absolute value in math terms, about spending.

If It Makes You Happy

Spending, Happiness, and Financial Health

marknewfield.substack.com

 

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Sono d'accordo.

While I recognize that luck has been on my side, I also haven’t abandoned my curmudgeonly view of people who waste money and fail to plan, and thus end up in debt and facing a bleak financial future.

Lo spirito di sacrificio per costruire qualcosa di più grande non va più di moda.

One notion I came across in my Googling: It’s okay to spend money on things you enjoy. If you’re spending on things that make you happy, you shouldn’t feel guilty. That sounds like a solid 21st century justification: If it makes you happy, just do it. Seems a bit short-sighted and selfish to me.

My Car Journey - HumbleDollar

I WROTE AN ARTICLE in 2019 titled Mercedes and Me. It was about my 52-year quest to fulfill a promise to my father—one I’m sure he never even remembered. My promise: to buy a Mercedes, a vehicle my father sold for many years but could never afford, even at dealer cost. In 2014, after 10 years...

humbledollar.com

 

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Our own personal experience backs up the proposition that the sizing decision, often an afterthought, is actually the most critical part of investing.

Victor had about 80% of his family’s liquid wealth invested in the LTCM hedge fund. With the benefit of hindsight, this level of investment concentration was a mistake.

Unfortunately, there’s quite a bit of evidence that this failing is more widespread and persistent, suggesting that investors are systematically hurt by poor money management skills. For example, individual investors in aggregate severely underperform market returns, in both absolute and risk-adjusted terms.

Some of this underperformance comes from paying high fees, but much arises from having too much or too little at risk and usually at just the wrong times. A landmark study of individual brokerage accounts by University of California Professors Brad Barber and Terrance Odean, aptly titled, Trading Can Be Hazardous to Your Wealth, found that individuals who actively traded their portfolios underperformed market returns by 6% per annum. Other researchers have found that the aggregate returns that investors in mutual funds experience are typically several percentage points per year below the returns that a buy and hold investor in those same funds would have earned.

It’s virtually a law of human nature that we experience a diminishing marginal benefit from further and further increases in spending (or wealth). This is why the utility we derive from spending our wealth doesn’t mirror the monetary sums involved. Thinking this way makes it clear that we should make decisions that maximise our utility rather than purely monetary outcomes. These ideas are at the root of economic thought and permeate even through the younger branches of the economics tree, such as behavioural finance.

The utility-based decision framework has at its core three main steps for any given financial decision. First, we need to assess possible monetary outcomes and estimate their associated probabilities. Then we need to map these monetary outcomes into utility outcomes. Finally, we need to search over the range of different possible decisions, to find the one which produces the highest Expected Utility.

The framework of making decisions to maximize Expected Utility has been criticised for not being a realistic representation of how people actually behave. Indeed, researchers have documented myriad cognitive biases that result in inconsistent and irrational decision-making.

No framework would be needed if people were naturally excellent at making decisions involving a complex web of probabilities, scenarios, and transformations of monetary sums to personal utility. But we know that we aren’t.

The fact that the framework and actual behaviour don’t always agree is a sign that the framework can add value. People will undoubtedly still choose to make seemingly suboptimal decisions in some ways — that’s part of being human — but better to do so knowingly and with an ability to estimate the cost rather than out of ignorance or for lack of a better alternative.

Making better decisions is not a zero-sum game. Sound financial decision-making, consistent with your individual preferences, will not only increase your and your family’s expected happiness, but will dramatically increase the welfare of our entire society.

The puzzle of the missing billionaires | TEBI

A new book aims to solve the puzzle of the missing billionaires — why the descendants of very wealthy people often make atrocious financial decisions

www.evidenceinvestor.com