The untold risks of average returns

This headline might sound confusing at first sight, but behind it is a topic worth thinking about. As one understands what’s behind “average returns”, a portfolio check-up could be appropriate, especially if one is overweight in stocks with past above average performances paired with high valuations. A few thoughts on risk-adjusted investing.

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Quitting at a loss to free up capital and the mind

Today, I’m writing about one of my (former) best stock ideas which didn’t play out as initially thought. Besides describing the case and the reason that led me to throw in the towel, I also want to use it to show why it’s important to regularly go over one’s portfolio and to cut the weeds.

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Why I don’t like diversification

Buying either parts of or even entire other companies is a common way for businesses to grow. This inorganic route though is often used for empire building (higher salaries and bonuses), sometimes even to hide own problems inside the core business (presenting an external growth story) and more often than not destroying shareholder value by overpaying for the targets. Today, I’m discussing a company that is losing through diversification.

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Why it makes no sense to copy Warren Buffett

This is a topic I’ve wanted to write about for a while. Those stock pickers who decide not to migrate to the camp of chartists, tee leaf readers or other witchcrafts, will likely join the group of value investors. In this context, the name of Warren Buffett must not miss. Many investors claim to emulate his strategy, others try to seek inspiration which stocks to buy. Today, I will show that both are delusions.

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Today’s tech-leaders… can stop existing tomorrow

Tech stocks, “Big Tech” or the “Magnificent Seven” – the same the names get more stupid, the riskier investing in their stocks becomes. Many do not see it this way. For the bona fide investor these are core investments of their portfolios with great future potential. However, a critical look back at history tells us that the risk / reward ratio is not favorable. Size does not equal safety.

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Why I don’t care about the Lindy effect

There are many rules of thumb and well-intentioned advice for younger investors. One such “rule” says that it is better to buy stocks of older and proven companies. While I do not disagree with this on an isolated basis, I am missing the second part, namely that every business has a certain life expectancy. There comes inevitably a time for every company to either step into the background or to disappear altogether. History is full of examples.

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(Why) You should not try to outsmart the market + new research report

It is no secret that many retail investors tend to act on the stock market exactly contrary compared to what they do in everyday live. A special discount or promotion – let’s get it! When stocks fall – panic. When stocks or themes are en vogue, they jump in to not miss the (rolling) train – despite the next coming. Often, this behavior is explained by emotions of fear and greed. However, it goes further than that. There’s a component to it, I call “pseudo-logic”. Why you should be cautious with logic when investing is today’s topic.

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Is it worth it to buy small stock positions?

This question is likely one of those where you will receive many different answers, depending on who you ask. Advocates of big positions are likely to tell you that without decent individual positions in a concentrated portfolio, you won’t achieve any meaningful returns. Practitioners of many small positions, on the contrary, will warn you about the risks of putting all your eggs in one basket. So, who’s right, what is definitely wrong, and what to apply?

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