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Want to Be a Better Investor? Stop Staring at Your Portfolio

Investment Management Associates, Inc.

John Bogle
Vitaliy Katsenelson


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Positivity     43.00%   
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The New York Times
Write a review: Fortune

Instead of messing with kiddie stuff like setting prices on shoes and sugar like Soviet central planners did, a few dozen “free market” central bankers set the price of the single most important commodity, the risk-free rate, which is at the core of most economic decisions and the valuation of all assets.Valuation of companies whose earnings lie far, far in the future benefits dramatically from falling interest rates, while the valuation of companies whose earnings are not growing as much and are concentrated in the present and near future doesn’t enjoy that benefit.A similar dynamic happens in the bond market: Bonds with short maturities (similar to value stocks) are impacted a lot less by declining interest rates than long-term bonds (similar to growth stocks).As the impact of suppressed interest rates rippled through the markets, active managers that had even a modicum of discipline in their stock selection found themselves trailing their benchmarks and even getting fired, while customer money flowed into index funds that indiscriminately buy what is in the index. If you are a fundamental investor, you are not just buying stocks, you are buying fractional ownership in businesses.You spend hundreds of hours on research, you read company financial reports; you talk to management, competitors, customers, suppliers.

As said here by Vitaliy Katsenelson