Posts Tagged ‘investor’

“No matter how skilled you are as an investor, upping your savings rate is more powerful to your wealth than either increasing your income or increasing your investment returns.  That’s because it’s a one-two punch… you increase what you have to invest, while decreasing what you spend.  You also learn how to live longer on less money….  Remember that ultimately, how much you save will be the difference between a lifetime of poverty… or one of wealth.” -David Eifrig

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“Since 1994, Dalbar‘s Quantitative Analysis of Investor Behavior (QAIB) has been measuring the effects of investor decisions to buy, sell and switch into and out of mutual funds over both short and long-term time frames.  The results consistently show that the average investor earns less – in many cases, much less – than mutual fund performance reports would suggest.” -Dalbar.com

“Research firm Dalbar publishes an annual study on investor behavior called the Quantitative Analysis of Investor Behavior (“QAIB”).  Every year since 1994, the QAIB has compared stock market returns over the previous decades with returns earned by real investors.  The result is always the same: The market beats the investor.

For the 30 years ended December 31, 2015, the S&P 500 returned 10.4% per year, on average.  Equity mutual fund investors earned an average return of just 3.7% per year.

To make plenty of money in stocks, you must behave better than the vast herd of investors.  A single behavior – refusing to sell at market bottoms – would have multiplied profits nearly tenfold.” -Dan Ferris

Worst Enemy

Posted: June 22, 2016 in Thought for the Day
Tags: , , ,

“The investor’s biggest obstacle and worst enemy is likely to be himself.” -Benjamin Graham

No matter how skilled you are as an investor, upping your savings rate is more powerful to your wealth than either increasing your income or increasing your investment returns.  The best part is that it doesn’t really matter how much you make.  It only matters how much you save.  That’s the part most people don’t appreciate.” -David Eifrig

Warren Buffett, in his 2011 letter to investors, defined investing as “the transfer to others the purchasing power now with the reasoned expectation of receiving more purchasing power – after taxes have been paid on nominal gains – in the future.” What’s important to remember is “It’s not the dollar value of your investment returns that count. It’s how much your investments increase or decrease your spending power after you’ve paid taxes.” -Chris Hunter B&P Briefing

Well, here we ago again.  Up until now, most of the “questionable” home loans available since the housing meltdown have been rural development loans offered through the USDA.  The questionable part in my mind are the “no down payment required” and “guaranteed loan” aspects.  But, according to a Reuters article, Wells Fargo is again planning to jump back into the “subprime” market.  Why?  Because they are experiencing a downturn in revenue.  Hmm, does this seem like a sound business decision?  (GM is also selling cars to subprime customers to help their sales).  Does this sound promising?

Some interesting points from the Reuters article makes me scratch my head:

1.  “…loosening of credit standards could boost housing demand…”  Shouldn’t demand for housing be boosted because people can actually afford them?  Isn’t it a false demand by any other standard?

2.  “To avoid the taint associated with the word ‘subprime’, lenders are calling their loans ‘another chance mortgages’ or ‘alternative mortgage program’.”  Does changing the name of something actually make it better?  Does duping people make these mortgages safer?

3.  “If the borrower does not meet those hurdles and later defaults on a mortgage, he or she can sue the lender and argue the loan should never have been made in the first place.”  Seriously, then why do we make the purchaser sign on the bottom line?  That point was missed during the initial crisis; purchasers were simply considered victims.  Everyone wants to blame the bank.  Thank you Dodd-Frank!

4.  “Subprime mortgages were at the center of the financial crisis, but many lenders believe that done with proper controls, the risks can be managed.”  I am sure they thought the same thing last time.  Risk is guaranteed to be risky; a la the recent death of the snake handling pastor.

5.  “The bank is looking to lend to borrowers with weaker credit, but only if those mortgages can be guaranteed by the FHA.  Because the loans are backed by the government, Wells Fargo can package them into bonds and sell them to investors.”  And there we have it!  Guaranteed by the government!  In other words, by the American taxpayer!  Let’s see, what would I provide to the American consumer if the government will guarantee it?  Anything!  The second part of the quote explains exactly what they were doing before, turning them into investments.  Subprime investments,  I’ll pass.

It looks like the strategy must be paying dividends.  According to the Wall Street Journal, “Household debt jumps as banks loosen up.”  Wells Fargo knows what works to get people borrowing.  The interesting thing is that they still haven’t resolved all of their issues with Fannie Mae and Freddie Mac from the original crisis, but see no issues with stepping back into those familiar waters.

All I can say is, good luck with that….