When choosing an investment strategy, it’s important to have a solid understanding of past performance metrics to determine potential risks and returns. In this article, we’ll discuss some of the common metrics used to evaluate investment performance. General Performance Metrics Time-Weighted Returns When measuring the performance of a portfolio, returns are simply the money gained […]
Category: Financial Independency 101
Take Control of Your Finances
Being your own financial advisor can be a daunting task. But it is also one of the most important steps you can take towards achieving your financial goals. With the current economic climate, it has become more important than ever to be in control of your own financial future. In this post, we will explore […]
Understanding ETFs: How Exchange-Traded Funds Can Benefit Your Investment Portfolio
I realized that I hadn’t yet made a super explanatory post on ETFs, let’s fix it right away. Exchange-traded funds, or ETFs, have become increasingly popular in recent years. As a way for investors to gain exposure to a variety of different assets, sectors, and markets. According to data from the Investment Company Institute, ETF […]
Mean Reversion
Mean Reversion is a statistical phenomenon in which extreme events are followed by those closest to the mean. In this post, I’ll use regression, mean reversion, and reversion to mean the same term. Don’t get confused. To understand regression to the mean, you must first understand correlation, which is the strength of the relationship between […]
Rebalance your portfolio
Rebalance your portfolio only when needed. Don’t get caught up in the urge to always have the right ratios between assets. Our portfolio needs to be rebalanced because the returns on our asset classes vary over time. Suppose we have a portfolio that is 50% stocks and 50% bonds.Over the past year, stocks have appreciated […]
Be faithful to your asset allocation
We have already talked about asset allocation, today we will see how to remain faithful to it, even in the worst moments. We have already seen investor biases and in this case the disposition effect helps us maintain our position even at a loss, waiting for it to turn positive again. Paradoxically, the problem comes […]
Currency Diversification
You can also make currency diversification indirectly. How?Now we see it. Let’s start with what currency diversification is and why it is useful. Forex is the largest global financial market. Central Banks use it to regulate the value of their currencies. The goal is to keep exchange rates fixed for strong economies in the long […]
Investment Biases
Large investors also fall into investment biases. Let’s start from a concept, The way you perceive things is influenced by other things (e.g. the outer circles). Which of the two inner circles is larger? Our brain is bad at perceiving absolute values. It’s all relative. By knowing this, you can consciously adjust for the difference. […]
Investor Profile
The best investor profile is the dead investor. Let’s explain better An investor profile defines an individual’s preferences in investment decisions, for example: Before we move on, let’s divide your financially conscious life into a few ages: In this blog we are looking at how to get the best possible return from the market with […]
Market efficiency & financial crisis
We can summarize the market efficiency concept with the following epigram: “Prices reflect all available information.” A market is efficient if all investors know the same information and if the information are relevant to determine the value of a company. Efficiency Definition Fama, the same of the previous post, in 1965 defines 3 forms of […]