Author Archives: petewargent

Market cycles Stocks don’t always go up, they continue to move in cycles, in turn becoming expensive and then cheap. New ideas gain currency driving markets higher on the promise of future riches, until eventually the products and companies in question fail to deliver, whereupon valuations fall back to earth (often faster than they wentContinue reading “Reversion to the mean”

The lifespan of companies When you look back at lists of the top companies from 20, 30, or 40 years ago, it’s nearly always remarkable how few of them are still at the top of the tree (or even around at all!) today. But where do they all go? Well, some get taken over byContinue reading “Understanding the risk hierarchy”

Don’t be average… If someone told you to cross a river because it’s 4-feet deep ‘on average’ you’d be justifiably upset if it turned out to be 8-feet deep in the middle with strong cross-currents. It’s a bit the same when it comes to so-termed ‘average returns’ from investments. It’s often said that you mightContinue reading “Sequence of returns: risks and opportunities”

Nobody knows anything Although we like to weave convenient narratives to explain history, the belief that life is linear and predictable can be a dangerous fallacy. In real time, the world is random and unpredictable, and heavily impacted by rare and totally unpredictable outlier outcomes, known as ‘Black Swan’ events. The dirty little secret ofContinue reading “Time in the market, or timing the market?”

The magical benefits of rebalancing Suppose one of your investments shoots 40% higher. What are the chances of it doing so again soon? Not impossible, of course! But also unlikely. Too often investors experience exciting results, only to undo all the good work by giving back most or all of their paper profits. As BenoitContinue reading “The magic of rebalancing”

The 3 Cs There are three excellent reasons to consider managing your own money which we know at the 3 Cs of investing: Cost, choice, and control. Cost The cost of advisory and fund management fees can be very detrimental to returns. If the ‘average’ annual return from markets is to be about 7-8%, thenContinue reading “Why you should manage your own money”