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  • The median age in the U.S. is 36.8
  • The median income in the U.S. is $51,939
  • The average 401k match is $1 for $1 up to 6%

A 36.8 year old investing 10% of their $51,939 income with a $3,116.34 match:
With just average stock market returns of 10% would have $1,114,479.31 by retirement.

Join 15,000+ other readers who have learned how anyone, even beginners, can easily make this desire a reality. Download the free ebook: 7 Steps to Understanding the Stock Market.




Strategic Asset Allocation: Unique in Nature, Critical for an Uncertain Future

“You should have a strategic asset allocation mix that assumes that you don’t know what the future is going to hold.”

Ray Dalio

Today we are going to explore strategic asset allocation and the benefits it can offer investors.

Most investors spend the majority of their time agonizing about what stock to buy, or whether or not to purchase some real estate, but almost none of us think about the best way to set up our portfolio.

The majority of investment decisions revolve around these three decisions:

  1. Asset Allocation
  2. Market Timing
  3. Security Selection

Market timing is a fool’s errand, so that must be discounted, but the other selections are more critical.

Experts argue that the selection of assets account for more than 90% of returns, rather than which security you choose.

In today’s post, we will discuss:

  • What is Strategic Asset Allocation
  • The Difference Between Tactical and Strategic Asset Allocation
  • Principles of Asset Allocation
  • How to Set Strategic Asset Allocation
  • Examples of Strategic Asset Allocation

Ok, enough preamble, let’s dive in.

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What is the Ideal Investing Timeframe? Long vs Short!

Coming out of the right corner, we have the newcomer, the up and coming, short-term investments, all set to face the current heavyweight champion of the world, long-term investments!  This is going to be an epic battle for the ages, so who is going to win – long vs short!

Everyone knows that investing for the long-term is the best plan, right?  If you’ve even thought about investing, then you know that investing for the long-term is the most ideal timeframe for you to invest because anything shorter than a few years is just considered trading and not investing.  I mean, come on, even Warren Buffett says that you need to be focused on the long-term:

“If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.” – Warren Buffett

I read a really good article from The Balance talking about if long or short-term investments are better, and talking about all of the different aspects at play for each person, so I highly recommend checking that out, but I am here to talk about the numbers ONLY!

In full transparency, I have run all of the analysis but haven’t looked at any of the results, so I still think that long-term investing is absolutely better, but I am trying to go into this with an open mind.

One thing that I am really good at doing in my personal life (maybe even too good if you ask my wife), is playing devil’s advocate and challenging the status quo.  I am really good at doing this in my professional life as well but for some reason it’s taking some time to get there with investing. 

Relistening to the interview with Tobias Carlisle on the Investing for Beginners Podcast, I keep getting more and more motivated to challenge the status quo and really think outside the box.  Just challenge the consensus and see how things look.  So, this is what I am doing.

Everyone says that investing for the long-term is better, and they say it’s like significantly better, so let’s see just how much better (if at all) it actually is!

I took the S&P 500 for as long as I could go back in history on Yahoo Finance, which is 1928, and then broke down comparisons for if you were to buy and hold the S&P 500 for anywhere from 1 year to 10 years, in yearly increments.  Let’s take a look at the results below!

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Walt Disney Company (DIS) 10Q Summary

Walt Disney Corporation reported its second-quarter earnings of 2020 on May 5. The full results of the Covid-19 Pandemic are just beginning to make itself known to the world, and Disney is not immune, no pun intended.

In this post, we will break down the financial results of Disney for the second-quarter 2020, which ended March 28, 2020, and present it in a summary form, such that you can look over the good, the bad, possibly ugly and get a sense of how the company performed during the quarter.

We will also cover how management is reacting to what is impacting its business and how they plan to react to how the virus has impacted them and what they expect in the coming months.

Most companies have pulled their guidance for the coming months, but we can get a broad overview of their expectations, as well as ideas of how they navigated the previous financial crisis of 2007.

Ok, let’s get to it.

Good Stuff

There were two bright spots for Disney in the second quarter. First revenue was up by year over year for Q2, an increase of 21%:

  • March 2020                      $18,009
  • March 2019                      $14,922

Also an increase of 29% over the last six months comparatively:

  • March 2020                      $38,867
  • March 2019                      $30,225
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Wells Fargo (WFC) 10Q Summary First Quarter 2020

Wells Fargo 1Q20 Summary

Wells Fargo reported its first-quarter earnings on April 14, 2020. What follows is a summary of the bank’s results for the quarter.

Some financial results and metrics at the end of the quarter:

  • Market Cap – $118.6B
  • Price at the end of Quarter – $28.70
  • Earnings Per Share – $0.01
  • P/E – 10.14
  • ROE – 0.09%
  • ROA – 0.13

Overview of 10Q Earnings

Wells Fargo reported a net income of $653 million for the first quarter of 2020, down from the previous quarter level of $2873 million and the year-ago quarter of $5,860 million.

The decrease in earnings included $4 billion in provision expenses for credit losses of which $2.9 billion reserves for loans, $909 million for net-charge offs for loans, and $172 million of provision expense for debt securities which included $141 of reserve build and $31 in net charge-offs.

Wells Fargo also recognized a $950 million impairment, which is recognized in net gains(losses) from equities and debt securities. $621 million of net losses on equity securities were from deferred compensation plans investment results, which was offset largely from a decline of $598 million in employee benefits expense, again from a net gain(loss) from equity securities and employee benefits expense.

The quarter also saw $464 million in operating losses, and a $463 million gain from sales of residential mortgage loans, which was reclassified to held for sale in 2019.

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What is EBITDA and Should Equity Investors Care About It?

The term earnings before interest, taxes, depreciation, and amortization (EBITDA) has gotten extraordinarily popular over the last few decades. Companies will often comment on EBITDA in their management discussion and analysis (MD&A), especially when they talk about debt and financial leverage. But as an equity investor, should I really care what EBITDA is?

EBITDA does provide an equal footing to compare profitability across companies before considering interest, taxes, depreciation, and amortization.

However, EBITDA does not represent actual cash that is available to be returned to shareholders; which is what being a shareholder is all about.

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The History of Stock Market Volatility in the United States

I’m going to need you to buckle your seatbelts and get ready…this is going to be an extremely bumpy ride as I take you through the history of the major periods of stock market volatility that we have experienced in the last 100 years!  So, with that being said, ladies and gentlemen, start your engines!

Man, that was lame. Lol.  But for real, get ready – this is going to be a heavy data blogpost about some extremely serious periods of stock market volatility that have occurred since 1928. 

First off, why is the stock market so volatile in the first place?  Well, it’s simple really.  The stock market is nothing more than a bunch of shares of companies that the public owns, where the public dictates the price each day, simply based off what they’re willing to pay for those shares. 

The thing is, people are absolutely insane.  People don’t buy and sell stocks based off fundamentals, or at least not the majority of people.  People buy and sell stocks based off what they hear from coworkers at the water cooler, or what they see on CNBC, or maybe even a shiny new company that just came off an IPO. 

They sell their shares because a company has bad earnings call just to buy that stock back when it’s 10% higher because they don’t want to miss out on it.

People are the most unpredictable thing in the world, and it’s not only with investing, but with any facet of life.  I once had an internship with a 3rd Party Logistics company and I called a truck driver to ask him if he was going to make the delivery on time.  He said no.  When I asked what the reasoning was, he responded with “I wanted to go to the casino.”

Wtf.

One of my favorite quotes about the stock market, in general, is from William Feather:

“One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.”

How true is that.  You’re selling or buying to someone else that is buying or selling those same shares and you both think you’re right, but you’re not.  It just doesn’t work that way.  But that is one of the many things, and in my opinion the biggest thing, that causes the stock market to be so volatile.

So, just how volatile is the stock market, actually?

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Inversion Thinking: How Charlie Munger Avoids Stupidity with Investing

In today’s post, we are going to discuss some ways to use inversion thinking to avoid stupidity when making investing decisions.

Using a framework established by Stoics such as Marcus Aurelius, Seneca, and Epictetus, and by more modern thinkers such as Charlie Munger and Howard Marks. We can use their ideas and thoughts to help us avoid losing money by eliminating mistakes.

In today’s post, we will discuss:

  • What is Inversion Thinking?
  • Origins
  • Charlie Munger’s influence
  • How to Avoid Stupidity

Ok, enough preamble, let’s get to it.

What is Inversion Thinking?

Inversion is thinking of what you want to achieve in reverse. Another way to put it is instead of thinking about the future results, and what you want to achieve, you think to flip it in reverse and think about what you don’t want to happen.

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Economy 101: The Fed, Money Supply, Debt, Inflation, and Deflation

I am now a few years into my investing journey and while I feel like I have a pretty good grasp on what sort of quantitative and qualitative data I should be looking for in a company, it dawned on me that I don’t have as good of a grasp of just high-level economic data as I think I should, and I figured you might be in the same boat.  So, let me introduce to you… Economy 101!

Overall, there are really five different areas that I want to focus on, that are all different but also correlated to one another:

  • The Fed
  • Money Supply
  • Debt
  • Inflation
  • Deflation

Andrew and Dave recently gave us a really thorough explanation into the Fed on the Investing for Beginners Podcast, and he did a great job at making it simple to understand.  In essence, the Federal Reserve is the bank for the United States, and they have two goals:

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Why the Financially Literate Can’t Build Wealth: 5 Major Reasons

Personally, the best way for me to learn is with specific guidelines and a plan of action.  I know that not everybody is great at learning this way, but I think that when I am given specific examples and action plans of how to get better, that’s when I am most effective.  Fortunately for me, and maybe you, too, Robert Kiyosaki outlines 5 major reasons why the financially literate cannot build wealth in this chapter of Rich Dad, Poor Dad.

If I had to summarize Rich Dad, Poor Dad, to this point, I think that I would do so with the three/four following words:

  • Simplified
  • Realistic & Relatable
  • Actionable

Kiyosaki breaks everything down in terms that we all can understand by telling stories that he experienced himself.  The stories start in his early childhood so the lessons, while complex, are broken down into such an incredibly simple and easy to understand fashion that I truly think it’s a great book for all investors and entrepreneurs. 

He always finds a way to tie it back to a very realistic, actionable takeaway that you can have as an everyday person which is one of the reasons that I really recommend the book.  Giving actionable items at the end of chapters is what takes it from just a book of knowledge to words of wisdom in my eyes. 

So, you’re probably chomping at the bit to learn about the 5 reasons why the financially literate cannot build wealth.  I’ll stop making you wait…let’s go!

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10 Bagger: The Term Coined by Legendary Investor Peter Lynch

Have you ever heard of a 10 bagger?  If not, it’s because you’ve never had one!!

Don’t worry, neither have I…yet!  I am destined to get there someday, hopefully sooner than later, but it’s all about sticking to the process!

So, what exactly is a 10 bagger?  Well, it’s simple – it’s simply a stock that is now worth 10 times the price that you initially paid for it.  That means a $10 stock is now $100, or a $40 stock is $400, or the Amazon share that you bought on 4/21/20 for $2,328.12 is now worth $23,281.20…speaking of, isn’t it time for Amazon to have a freaking stock split??

So, who is the genius that coined this term?  Well, it’s Peter Lynch.  Not the GOAT (Warren Buffett) but quite possible on the Mt. Rushmore of investing!

Personally, I think that Peter Lynch is one of the best sources of information that one could gain if they’re looking to learn about investing in the stock market.  He has written multiple books, with two of his most well-known being ‘Beating the Street’ and ‘One up on Wall Street’, but one of the things that I love the most about Peter Lynch, are all of his amazing quotes, and in fact, Andrew and Dave had an entire podcast where they talked about some of his very famous quotes and expanded on them.

Some of my favorites are:

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