The Four Pillars of Investing: Lessons for Building a Winning Portfolio 6 pot

... statisticians call a “standard deviation” (SD). This can be thought about as the degree of “scatter” of a series of values about the average. For example, the average height of adult males is about ... Wal-Martand Kmart. The formeris finan- cially healthyand universallyadmired, withlegendary management, a steadily growing stream of earnings, and a hugepileof cash o...

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... dividends for each year to the present, then add them all up. But with a few mathematical tricks, this nut is easily cracked. A Stream of Future Dividends, Forever and Ever, Amen To paraphrase the famous ... returns are quite accurately predicted by the Gordon Equation. As I’ve already said, these are essentially the laws of gravity and planetary motion of the financial...

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... high-octane Manhattan Fund. Unfortunately for Tsai, just at that point, he was struck with a fatal case of chimpanzee syndrome. The years 1 966 –1 967 were mediocre for Manhattan and in 1 968 , the patient ... that are easily explained by the laws of chance. Are we in Randomovia yet? Almost. If we actually were in Randomovia, we would find that above-average performance does n...

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... size of the fund, the size of the company, and the total amount transacted. As a first approximation, assume that it is equal to the spread. The four layers of mutual fund costs: • Expense Ratio • ... your 100 The Four Pillars of Investing This page intentionally left blank made possible the storage and analysis of a mass and quality of stock data that C...

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... practices the lack of historical knowledge is the one that causes the most damage. Consider, for example, the principals of Long Term Capital Management, whose ignorance of the vagaries of financial ... high— 57%—but the return of the EAFE was off the charts— 166 %! Had you started with a 50/50 portfolio at the beginning of the period, at the end, it wou...

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... amounts of capital now available. There was even a fashionable new technology involved: the laws of probability. Fermat and Pascal had recently invented this branch of mathematics, and, in 169 3, Astronomer ... regain iton the way down.Cheap stocks excite onlythe dispassionate, theanalytical,and theaged. But by far, the most fascinating aftermath of crashes is the political...

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... than all of them? On top of that, there are tens of thousands of professional investors using the kind of software, hardware, data, technical support, and underlying research that you and I can ... next major error that investors make is the assumption that the immediate past is predictive of the long-term future. Take a look at the data from the table at the begin...

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... were buoyantthat year.Then,asnow, tech stocks wereall the rageand trad- ing volume was high,atleast bythe standardsof the day. Brokersat other firms, all ofwhomworked on acommissionbasis, were making money ... disturbing was theamountof trading taking place in these accounts. A total of 179,820 trades were executedin2,5 06 accounts over the course of seven years. On average, that...

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... 12-4. Again, it is important to realize that the amounts on the vertical scale are in inflation-adjusted 1 966 dollars. 232 The Four Pillars of Investing Figure 12-1. $70,000 annual real (1 966 $) ... financialjournalismheap areaselect num- ber of writers whoare so popular and craftprose so well that they canget away with a regular output of unvarnishedreality. As we’ve alre...

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... in a taxable account) or for a house down payment, as long as enough of the bonds are in a taxable account. Although the central tenet of asset allocation is to consider the per- formance of ... pension 266 The Four Pillars of Investing • 5% Vanguard Small-Cap Value Index (IRA) •12.5% Vanguard Tax-Managed International • 5% Vanguard REIT (VA) •12.5% Treasury Ladde...

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