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,…

 

AAII Sentiment Survey: Pessimism Falls to An Unusually Low Level

Pessimism about the short-term direction of stocks among individual investors fell to its lowest level in more than a year. The latest AAII Sentiment Survey also shows increases in optimism and neutral sentiment. Bullish sentiment, expectations that stock prices will rise over the next six months, rose 2.3 percentage points to 41.6%. Optimism was last…

 

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…

 

AAII Sentiment Survey: Optimism Back Above Average

The percentage of individual investors expecting an increase in stock prices rebounded this week according to the latest AAII Sentiment Survey. Neutral sentiment declined while pessimism is slightly higher. Bullish sentiment, expectations that stock prices will rise over the next six months, rebounded by 4.2 percentage points to 39.3%. Optimism is above its historical average…

 

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…

 

AAII Sentiment Survey: Neutral Sentiment Rises to a 7-Month High

The percentage of individual investors describing their outlook for stocks as “neutral” is at a seven-month high. The latest AAII Sentiment Survey also shows a drop in optimism and an increase in pessimism. Bullish sentiment, expectations that stock prices will rise over the next six months, pulled back by 4.8 percentage points to 35.1%. Optimism…

 

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…

 

AAII Sentiment Survey: Optimism Jumps to a 3-Month High

Optimism about the short-term direction of stock prices jumped to a three-month high in the latest AAII Sentiment Survey. Neutral sentiment also rose, while pessimism plunged. Bullish sentiment, expectations that stock prices will rise over the next six months, rose 8.1 percentage points to 39.9%. Optimism was last higher on November 7, 2018 (41.3%). This…

 

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 Sentiment Survey: Neutral Sentiment Nears a Six-Month High

The percentage of individual investors who describe their short-term outlook for stocks as “neutral” is at its highest level in nearly six months. The latest AAII Sentiment Survey also shows a drop in optimism and a slight decrease in pessimism. Bullish sentiment, expectations that stock prices will rise over the next six months, fell by…