10 Tips for Succesful investing
To be a successful investor over the long term, we believe it is critical to understand, and hopefully overcome, common human cognitive or psychological biases that often lead to poor decisions and investment mistakes. Cognitive biases are ‘hard wired’ and we are all liable to take shortcuts, oversimplify complex decisions and be overconfident in our…
5 portfolio pitfalls to avoid
A new reader asked this week for my advice on successful investing. Like too many investors, she had a “cocktail” portfolio – a mismatch of stocks that promised quick gains. There was no investment strategy, she overtraded and returns were not benchmarked. I’ve seen this problem too many times over the years. In the hunt…
How to take some risk out of your portfolio
Diversification is the key to reducing risk in a portfolio. Holding stocks across business sectors allows the superior performance of stocks in “hot” sectors to counter balance poorer performance in stocks not doing as well. Sounds good enough but some studies indicate it takes a portfolio of 25-30 stocks to achieve a maximum level of…
Bond yields and what they tell us about the economy
Sarantis Tsiaplias, University of Melbourne When the Australian Office of Financial Management borrowed A$4.25 billion for 20 years at an interest rate of just 2.865% this week, economic commentator Peter Martin called it “the deal of the century”. Governments issue bonds to raise funds to pay for general expenses and projects such as the stgelopment…
How to spot a winning IPO, we backtest some stocks
Retail investors looking to cash in on the burgeoning Australian IPO market are constantly warned of the dangers of jumping on board without reading the Investment Prospectus of a company they are considering. Professional analysts have the time and are paid to wade through a weighty prospectus as part of their jobs. Consequently far too…
What is your investment wealth ratio?
By Wealth Foundations Absolute measures of net worth and net investment wealth don’t, on their own, tell us much about financial independence. For example, net investment wealth of $2 million may be more than enough if you only spend $60,000 p.a. but totally inadequate if you want to support a $150,000 p.a. lifestyle. Charts 2-6…
‘Thrill investments’: excitement with high risk
By Wealth Foundations It’s a reasonably regular occurrence for our clients to be offered the chance to participate in “fantastic”, once-off, investment opportunities, that offer large potential upside, by people they know and trust. And most of these people are genuine in their belief that they are doing our clients a favour. When we are…
Concentrated investments are bad bets
By Wealth Foundations Most people are attracted to the idea of becoming fabulously wealthy by being a substantial and early investor in the next Microsoft, or Google. But they generally understand that the chances of selecting such “winners” are slim. However, it is not widely understood that although a large holding in a single investment…
Explainer: black markets, grey markets, and dark pools
By Richard Heaney, University of Western Australia There are a range of markets available to buyers and sellers that allow them to exchange goods and services. But whereas some markets are highly regulated, others are not regulated at all. The sale of tobacco and alcohol is fairly heavily regulated, while there is little regulation governing…
Is residential property a good investment?
By Wealth Foundations There has been a surge in residential property prices recently, apparently driven by investors rather than homeowners. Like most Australians, their answer to the question, “Is residential property a good investment?” would clearly be “Yes”. And typical reasons given would include: – It’s safe and always goes up in value. In fact,…
