Weekend Reading for 3/10/2017
Invisible Alpha Blog
A Simple Rule of Thumb
I thought it would be interesting to look back and see how some of the simplest portfolios would have performed over the last decade, through the Financial Crisis. An old rule of thumb for diversifying your portfolio between stocks and bonds is to subtract your age from 100, and allocate that percentage to stocks. For example, if you are 30 years old, allocate 70% of your portfolio to stocks (100-30) and 30% to bonds. Easy enough…
Chart of the Week
“Last week the cryptocurrency bitcoin made the headlines again: the price of bitcoin had surpassed the gold price for the very first time as its value rose to an all-time high. As of March 5, 2017 one bitcoin was worth approximately 1,250 dollars, making the five richest men on earth millionaires in bitcoin too. Bill Gates, the richest of the five, had a net worth of 85.6 billion dollars, which equaled 173.500 gold bars or 68.5 million bitcoin.
The top 5 is completed by Warren Buffett, Jeff Bezos, Amancio Ortega and Mark Zuckerberg. Together these billionaires own 366.4 billion dollars, or the equivalent of 742,250 gold bars or 293.1 million bitcoin. The latter purely hypothetically of course: the number of bitcoin in circulation today is only roughly 16.2 million.”
3 Good Reads
Let Me Convince You to Save Money (Morgan Housel)
“But the best reason to save is to gain control over your time. Everyone knows the tangible stuff money buys. The intangible stuff is harder to wrap your head around, but can be far more valuable and able to increase your happiness. Savings gives you options and flexibility, the ability to wait and the opportunity to pounce. It gives you time to think. Every bit of savings is like taking a point in the future that would have been owned by someone else and giving it back to yourself.
A Watched Portfolio Never Performs (Longboard Funds)
“Despite the influx of information, there’s still an easy way to counter prospect theory: portfolio balance. The more balanced your portfolio is, the less volatility you’ll feel. Lower drawdowns mean less fear and greed, which of course means fewer emotional decisions and reduced effects of prospect theory. Awareness of this pattern helps, too.”
Amazon’s Leadership Principles (Amazon)
“Our Leadership Principles aren’t just a pretty inspirational wall hanging. These Principles work hard, just like we do. Amazonians use them, every day, whether they’re discussing ideas for new projects, deciding on the best solution for a customer’s problem, or interviewing candidates. It’s just one of the things that makes Amazon peculiar.“
Enjoy your weekend!