Paying a Premium to Take on More Risk

Would you willingly pay $1.25 for something worth $1.00? This is not a trick question. The data showing the current price and the actual value is clearly stated and easily accessible. Knowing this, would you pay $1.25 for something worth $1.00? In a world operating in accordance with the efficient market hypothesis (EMH), such price…

 

Protect Your Capital – Never Chase High Yield

This week’s AAII Weekly Digest highlights these “must-read” AAII articles:   Interest Rate Sensitivity and Bond Pricing How can it be that there are times when “safe” assets such as high-quality corporate bonds or U.S. Treasuries exhibit levels of price volatility that may normally be associated with the stock market? This article outlines a set…

 

Think Twice Before Making Your Own Market (Br)exit

There is an old investing adage: “the market is always right.” Investors would be wise to question this adage in light of last week’s Brexit referendum. If the market is always right, then why were traders bidding stocks up as the British were voting to leave the European Union? For that matter, why did stocks…

 

Investment Wisdom From Wall Street’s Legends

This article originally appeared in the November 2014 issue of the AAII Journal. “A country of security analysts would still overreact. In short, even the best-trained investors would make the same mistakes that investors have been making forever, and for the same immutable reason—that they cannot help it.” —Seth Klarman The vast majority of experienced investors…