Capital Growth Theory: how to maximise your long-term wealth

Position sizing If you’ve ever played blackjack at the casino you’d be familiar with the concept of bet sizing. You don’t bet the same amount regardless of your hand; instead you aim to place larger bets on high probability events. Here’s a very simple formula where ‘p’ is the probability of winning, expressed as aContinue reading “Capital Growth Theory: how to maximise your long-term wealth”

The benefits of effective asset allocation

Asset allocation If you see your financial advisor they’ll likely recommend that you allocate your assets between property, stocks, and cash (partly due to the tax incentives for real estate and equities in Australia). That’s because all asset classes have summer and winter seasons. Source: Novel Investor Sensible asset allocation can help you to adoptContinue reading “The benefits of effective asset allocation”

Why you should adopt systematic investing

Why you need a system Having a system is important because it guides you to follow successful habits, until eventually, you make successful decisions intuitively. Too often people start out in business or investing without systems, and this leaves them exposed to mistakes and errors. There’s an old rule of engineering that says if somethingContinue reading “Why you should adopt systematic investing”

Sequence of returns: risks and opportunities

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”

Time in the market, or timing the market?

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?”