When it comes to investing, everyone has heard that they need to diversify. Proponents of diversification argue that it reduces financial risk. But is diversification really necessary to reduce risk? The answer is no, but it depends on the type of investor you choose to be.
To see why diversification is not necessarily the best investment strategy, it is important to first understand why so many investors, financial advisors, and finance professors promote diversification.
The proliferation of new financial services, investing apps, and the elimination of trading fees have made investing more accessible to retail investors than ever before. According to a recent study by Charles Schwab, 15% of all U.S. stock market investors began investing in 2020.
These so-called “Generation Investors” are eager to learn and improve their investment plans. In 2021, 72% of these new investors say their approach is to buy and hold for long term gains as compared to 56% in 2020.
Historians believe that money was invented much earlier than writing, perhaps anywhere from 6 to 9 thousand years ago. Unsurprisingly, the early history of money is not well-documented.
Before the invention of money, people in need of goods or services would enter into an agreement to trade, or barter. Bartering did not work very well because it was inefficient. If a person wanted apples and only had chickens to trade, he would have to find another person who not only had apples but also desired chicken. …
Impulsive trading and indecision are behaviors that play a major role in who wins and who loses in the stock market. A little perspective can save the restless investor many sleepless nights when his or her portfolio is getting slammed. Anyone who is modestly observant of history and past trends understands and expects the stock market to go through cycles and corrections. However, when hard times finally arrive, many investors find themselves second guessing their investments and even contemplating taking a loss. …
In music, a cadence is a harmonic sequence that creates a sense of resolution or pause. It is one of the most fundamental structures in music.
Mozart’s manner of preparing and executing cadences is unique to his compositional style, so much so that one might call such passages “Mozartian”.
In western tonal music, authentic cadences are the most common class of cadences. Consider, for example, the perfect authentic cadence (PAC) consisting of the final two chords of Mozart’s Piano Sonata №13 in B-flat major. …
There comes a time in life when you realize that saving a portion of your paycheck or salary is not enough to meet your financial goals. You realize that you need to grow your savings. This is the moment most people encounter investing.
If you’re lucky, such a realization happens earlier in your life rather than later. The earlier you begin investing, the more you can exploit the power of time to grow your wealth.
Every new investor wants to be better than average. However, when you’re just getting into investing, it can take time to realize certain key principles…
The concept of genius has fascinated and captivated humanity for centuries. Genius is nearly impossible to precisely define, and a rigorous scientific measure of genius does not exist.
However, its ill-defined nature hasn’t stopped us from making certain observations about it or trying to identify it. Genius is extremely rare, and it can manifest in many forms, ranging from mathematical to musical.
Johann Sebastian Bach, a German composer of the Baroque period (~1600–1750), is considered by many to exemplify genius.
The term “intrinsic value,” is frequently used in financial circles, usually in reference to the share price of a stock. In short, it is the share price that will give you a good chance of obtaining a high return on your investment.
Calculating intrinsic value is as much of an art as it is a science. Why? Many people do it differently, and every calculation involves assumptions; namely, predicting the future!
However, rarely does anyone state how they arrive at their estimate of the intrinsic value. …
A scientist who loves coffee, classical music, running, and investing.