A Simple Depiction of Compounding
It has often been reported that Albert Einstein once claimed that “Compound interest is the eighth wonder of the world,” or “compound interest is the most powerful force in the…
Why Stock Picking Doesn’t Work – and Why You are Going to Try it Anyway
Whenever we find ourselves forced to make decisions with limited information, we are most likely to use a decision rule or heuristic based on prior experience. This approach is easy…
Equity Indexed Annuities – Simple Right?
Equity-indexed Annuities (EIA's) are complex investments sold by insurance companies that pay investors part of the capital appreciation in a stock index and guarantee a minimum return if the contract…
The Origin of Risk Aversion
Risk Aversion (as opposed to Loss Aversion) is the extent of the preference for certainty in quantifiable, positive outcomes. When presented with a choice between guaranteed and variable outcomes. It…
Move to Bonds with Age – Maybe Not!
The almost universal position among financial planners, and those in the financial media is that investors with an eye on retirement should reduce the “risk” of their portfolio with age.…
Efficiency: Part 3
I ran across an interesting question recently. If GDP growth has averaged roughly 3% per year for the past 50 years, and inflation also averaged around 3% per year over…
Efficiency: Part 2
I had a classmate in my MBA program who left his job as an equity analyst to come back to college to get an MBA. The longer-term goal was to…