Weekend Reading 2/17/2017
Invisible Alpha Blog
Risk and Uncertainty
When we talk about investing, “risk” is a common topic. Although paying attention to risk is critical, we should be careful to not let that focus overshadow something that poses a much larger threat to investors; uncertainty.
Chart of the Week
“The current bull market, which began in March 2009, is the 7th longest and the 6th strongest. For it to be the longest ever, it would have to continue through the fourth quarter of 2023. For it to be the largest ever, the S&P would have to return another 665%.” (Anatomy of a Bull Market – Newfound Research)
3 Good Reads
Knowing the Count (James Osborne)
“For most investors, we only really get a few chances. A long-term stock investor in the prime of his/her earning and savings years will probably see 3-4 major market cycles for the rest of their investment lives. Not exactly a huge sample set for making probabilistic bets.”
Getting Rich vs. Staying Rich (Morgan Housel)
“The more successful you are at something, the more convinced you become that you’re doing it right. The more convinced you are that you’re doing it right, the less open you are to change. The less open you are to change, the more likely you are to tripping in a world that changes all the time. There are a million ways to get rich. But there’s only one way to stay rich: Humility, often to the point of paranoia. The irony is that few things squash humility like getting rich in the first place.”
Should Stocks Be Worth More Now Than They Used to Be? (Michael Batnick)
“Looking at history, stock valuations appear to be way past the boundaries. But the average CAPE ratio for the last twenty years is 27, so maybe we’re not as close to the edge as the historical data would suggest. Either way, the question investors need to ask themselves is what to do with all this information, because there absolutely is a limit, a price at which stocks will be too high and will need to come down. The boundaries are always moving, so putting yourself in a position, right now, to weather the inevitable storm, is the key to capturing returns that the market has to offer.”
Enjoy your weekend!