Warren Buffett Deemphasizes Book Value as a Key Metric

Warren Buffett made a notable change in his annual Berkshire Hathaway Inc. (BRK.B) shareholder letter: He deemphasized the change in the book value of the company’s shares. To those who are long-time readers of his letters—and I suggest reading Buffett’s letters for the investing insights he shares—the change marks a definitive shift. Starting in 1985,…

 

Avoiding Overconfidence by Knowing What Type of Investor You Are

Among the many unintended consequences of the internet is an unrealistic sense of overconfidence. Researchers are finding people who believe they possess a level of skill or expertise after watching instructional YouTube videos. For example, some people believe that they can impersonate Michael Jackson’s moonwalk dance by merely watching a video about it, according to NPR’s…

 

Your Returns May Be Anything but Average

One argument underlying the notion of holding risky assets in long-term portfolios is time diversification. Time diversification holds that above-average returns tend to offset below-average returns over a long enough period. It’s based on the concept of reversion to the mean: Eventually periods of low and high returns converge back toward their average. The inherent…

 

Some Perspective on Buybacks Given Recent Criticism

Buybacks have been put back into the spotlight as boogeymen. Earlier this week, Senators Chuck Schumer and Bernie Sanders wrote an op-ed in The New York Times attacking share repurchases. Among their accusations were that stock buybacks mostly benefit the wealthy and divert money from being spent on capital expenditures, salary increases and other worker benefits. It’s…

 

How to Invest Differently Than a Mutual Fund

Conventional wisdom holds that buying index (“passive”) mutual funds and exchange-traded funds (ETFs) is an effective way to beat actively managed funds. Index funds tracking broad-based indexes are difficult to beat over extended periods because of their low costs. For many investors, they are a good option but are not the only way to beat…

 

AAII Members Share Their Memories of John Bogle

Last week, in addition to sharing a few of my personal thoughts about John Bogle, I asked those of you who either met or were otherwise influenced by Bogle to share your remembrances. We received many responses with praises and personal experiences. (Thank you. If you have remembrances of Bogle you’d like to share, let us know.)…

 

A Few Personal Thoughts in Remembrance of John Bogle

As you have likely heard, Vanguard founder John (“Jack”) Bogle passed away yesterday. He was 89. Bogle not only founded the mutual fund giant Vanguard, but his influence on the world of investing will be felt for generations to come. This week, I’m going to share some of my thoughts and memories of him. If…

 

Brokers Announce New Stock Exchange – What We Know

A new stock exchange was announced on Tuesday. Normally, this would not be particularly noteworthy for most individual investors. What differentiates the Members Exchange (MEMX) is who the founding members are: discount brokers Charles Schwab, E*Trade, Fidelity Investments and TD Ameritrade. Joining them are full-service brokers Bank of America Merrill Lynch, Morgan Stanley and UBS….

 

The Stretch of Low Optimism Continues

Last month, optimism and pessimism in our weekly Sentiment Survey reached unusual levels. Bullish sentiment plunged to 20.9% on December 12, 2018, while bearish sentiment jumped to a multi-year high of 50.3% by the end of December. Of the two, unusually low readings for optimism have a stronger record of being a contrarian indicator. The…

 

21 Investing Resolutions for 2019

Special notes: Our offices will be closed on both Monday, December 31, and Tuesday, January 1. The U.S. bond market will close early (2:00 p.m. Eastern Time) on Monday but the stock exchanges will operate on normal hours. All U.S. financial markets will be closed on Tuesday. On behalf of everyone at AAII, have a…