A few years ago I was asked by a client if we should consider moving a significant portion of their stock investments into dividend-paying stocks. I can understand their perspective – the promise of regular, consistent dividends can be tempting, especially for retirees on a mostly fixed budget. For example, a retiree who owns $1,000,000 of ABC high-dividend stock fund that pays them $50,000/year in dividends can provide a sense of security.  

However, investing in companies solely for their high dividend can introduce a number of risks that investors should be aware of…

Investor Jim Grant once said, “To suppose that the value of a common stock is determined purely by a corporation’s earnings discounted by the relevant interest rates and adjusted for the marginal tax rate is to forget that people have burned witches, gone to war on a whim, risen to the defense of Joseph Stalin and believed Orson Welles when he told them over the radio that the Martians had landed.”

Investing in the stock market is often viewed as a purely analytical practice that should look something like this…

One of the most frustrating parts of investing is that you can be right and wrong at the same time. Recent Netflix stockholders know this all too well. The story about Netflix back in 2018 was that their subscriber base was breaking out and that tremendous growth was ahead.

And they were right. Check out these numbers over the past 5 years….

Over the years I’ve noticed something about the clients I work with that behave well during market volatility – they don’t check their accounts all that often.  

They could probably tell you approximately how much they have invested, but it wouldn’t be exact – maybe off by 5 to 10%. When asked how they felt during a difficult year like 2022, they answered “fine – I just didn’t look.”  

To some, it may seem careless. But is it? Consider an investor who checks their accounts daily. Historically, they have about a 50/50 chance of seeing red on any given day – 46% to be exact…

Earlier this month I was reading a quarterly market update from a financial institution that was citing leading economic indicators that were all pointing to a looming recession and likely market decline in the near future.

Later that same day, I came across a chart from a market strategist at a large financial institution that cited the fact that since 1950 when we reach a 52-week high after more than a year without one, the market has been positive 1 year later every time…

There are significant costs to poorly timing the market. However, this does not stop many investors from trying since there can be significant benefits to getting it right.

There are lots of data points around why it’s so difficult, but I think the most underestimated reason is that even if we can identify the potential triggers of a market collapse, we often don’t know how or when they will be resolved…