This essay is the first of a series where I will share the best content from a handful of people I follow. I came across great content while writing this newsletter and it would be a shame to keep it for myself.
Today I will focus on Nick Maggiulli who is the author of Of Dollars And Data.
- A few words about Nick Maggiulli
- His 5 essays I enjoyed the most
About Nick Maggiulli
The perfect intersection of data and finance.
Nick is the Chief Operating Officer at Ritholtz Wealth Management and the creator of Of Dollars And Data, a personal finance blog where he publishes weekly. He can also be found on Twitter. He also publishes occasionally on Medium
The goal of his newsletter is to help us:
- Make better financial decisions
- Increase your understanding of markets
- Improve how you think about data
His 5 essays I enjoyed the most
Nick has been writing for 3 years and produced numbers of great essays. I compiled a shortlist of my favorites.
Nick defends the idea that continual purchase of a diverse set of income producing assets will make you rich. It does not really matter when you buy or how much you buy. Nick is a long-term investor.
Instead of trying to time the market (focusing on the when) as many new investors do. Just continue to buy. Timing can be a problem because the market could go up for a significant period of time before a correction happens.
You should think of buying investments like you buy food — do it often
If you split your investment and buy regularly you will benefit from Dollar Cost Averaging (DCA) which is a form of diversification. The only time you should sell is for rebalancing (annually or quarterly) or for retirement. Otherwise, just keep buying.
An essay about asset allocation (and multi-asset class portfolio).
He discusses Modern Portfolio Theory and portfolio optimization and explains how to compute the Efficient Frontier of a set of assets. Your Optimal Portfolio is a point on this frontier. It is the portfolio that maximizes your returns for a given risk tolerance (risk you are wiling to take).
Nick explains how asset allocation is fundamental to boost returns while minimizing risks, and how Gold can play a central role in the process.
No one knows where the markets are going, therefore you should buy a diverse set of asset classes while paying the least amount of fees possible.
For millennia gold has played a significant role in human society. It has been used to display power, facilitate trades and showcase status. Yet it is intrinsically worthless.
Gold has 3 main properties: Scarcity, Durability and Malleability, however it is not a good investment on its own: its growth is of no match with the S&P500:
However if you combine Gold with other asset classes, it can improve your overall portfolio performance and allow you to beat the market:
Investing is a loser's game: most investors who attempt to beat the market under-perform in the long run.
In a winner’s game, the outcome is determined by the correct actions of the winner. In a loser’s game, the outcome is determined by the mistakes made by the loser.
— Charles Ellis
Therefore the best strategy for investors is not to lose. As Buffett states:
Over the years, a number of very smart people have learned the hard way that a long string of impressive numbers multiplied by a single zero always equals zero.
— Warren Buffett
Avoid zeros at all costs.
Unemployment rates reached their highest level since the Great Depression (in the U.S. and many other countries). However every major market index recovered from their lows and are even reaching new all-time highs. How is that possible?
The U.S. stocks tend to perform better following record highs in unemployment than they do following record lows. Stock market is a leading indicator of the economy while the unemployment rate is a lagging indicator.
The stock market reflects where investors think future profits will be.
That’s all for today! I hope you enjoyed this new format.
If you enjoyed the article retweeting the thread on Twitter is appreciated :)
Also, if you have any question or feedback: leave a comment :)
See you next week!
Kevin from Hook
This newsletter does not provide investment advice
As always, trading activity is risky and exposes you to loss of capital. Never invest more than you can afford to lose. Never. The information presented on this page (and every other) are not investments counsels. Your use of this content is at your own risk. The content is provided “as is” and without warranty of any kind, either expressed or implied. All views and opinions expressed here are the author’s own, and are not representative of the views of any current, past or future employer.