Category Archives : Investing Theory

A list of articles on the theory of investing. Articles that give you the knowledge on how to invest. Looking at the Invest Money tab to find out what to invest in.


Why Stocks Are The Best Asset Class To Own

There has long been a debate about which asset class is the best to own. The discussion around property vs equities is particularly interesting. But in my opinion, there should be no discussion for long term investors as equities (stocks) are the best hands down. Looking at historic returns, equities have historically outperformed all other asset classes returning 9% per annum whereas property only returned 5.7% per annum. So why do equities outperform all other asset classes? The main reason why equities produce higher returns is due to equities having the unique ability to compound in value in a way that investments in other asset classes cannot. The explanation for […]


Investors Need To Understand Accounting – Warren Buffets 1982 Shareholder Letter

It seems that most investors today are oblivious as to the language of accounting. They would rather look at headline figures presented in financial media than actually dig through an annual report. Even famed investor Terry Smith once mentioned that analyst – the people that are paid to scrutinise a companies performance – don’t usually read a full set of accounts. But if you want to be an investor in individual stocks, it imperative that you learn the language of accounting. The accounts give you the clearest picture of a business and where it is headed. The accounts can show you weather a companies earnings are real or if they […]


Paying Up For Quality Growth Stocks – What Makes A Great Business

Great businesses produce great returns. As Warren Buffet said “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” Rather than heading the great porches advice, most investors underestimate business quality which results in unduly low market valuations for the very best companies. As an individual investor, understanding quality and its true value can lead you to craft an investment strategy that exploits market inefficiencies. What Makes an Extraordinary Business So what makes a business extraordinary that deserves a premium rating? A truly great business can come in many guises but by and large there is a need for an […]


Why stocks fall in August and September and Rise in December

Most people who have been invested in the market for a number of years realise that on average stocks tend to have a negative return during the months of August and September. Looking at data for the S&P500, we can see this phenomenon playing out. In September 2016, the S&P500s return was -0.12%, August 2016 – 0.12%, September 2015 -2.64%, August 2015 -6.26%, September 2014 -1.55%, August 2013 -3.13%. Considering we have been in a bull market over this period, it is peculiar that the average return over August and September for this period is negative. The reason why the US stock markets – and this other markets which are […]


How Not To Check Your Stocks Every Week – Key To Being Patient As An Investor 2

After purchasing my first property earlier this year, I registered with popular real estate site Zoopla in order to keep a track on the value of my property. Initially, this seemed like great idea as I could track my property value and net worth in real time. The first couple of weeks went great. My house was up £300 in the first week and £1000 in the next. I remember thinking at the time that I had certainly got a great deal. But the email I received on the third week ruined my mood. It showed that the value of the property was down £2000. I felt a chill in […]


How Benjamin Graham Valued And Bought Stocks

Ask any professional investor about Benjamin Graham and they will tell you he deserves his place amongst the top 10 greatest investors of all time. Ask Warren Buffet and he’ll certainly place Ben Graham as number 1. Benjamin Graham is the father of value investing and wrote one of the book that shaped many an investors career; investors Security Analysis. The book which is seen as the bible of the value investing world is an essential read for anyone wishing to invest in individual stocks. Benjamin Graham’s value investing strategy was focused on buying stocks with the same discipline as an insurance underwriter, carefully considering the risks, rejecting potential securities […]


What Do The Different Dividend Dates Mean? Declaration, Record, Exdividend and Payment Dates

When it comes to investing for dividends, it is important to familiarise yourself with all the different dates in a companies dividend timetable. The dates are important as it determines who qualifies for a dividend payment and when those payments will reach your bank account. The four key dates any investor needs to be familiar with are the declaration date, the record date, the ex-dividend date and the payment date. Dividend Declaration Date This is the date the company you are invested in announces the details of the dividend. By going to the investor relation section of the companies website on this date, you will be able to see information […]


Why Do Stocks That Have Been Dropped By Index Funds Outperform The Newer Stocks Added.

According to research from the great Dr. Jeremy Siegel, 82% of stocks that are removed from the S&P 500 go on to outperform the stock that replaced them in the index during the subsequent three-years.  This finding seems counterintuitive. If a stock gets added to the S&P 500,the FTSE 100 or any other major index for that matter it must be riding a momentum wave that has seen its valuation increase. Likewise, a stock that is removed from the S&P 500 must have been riding a wave of sluggish performance that warranted its exclusion from the index. So what’s the reasoning? To understand the mechanics of Dr Siegel’s finding, contemplate […]


Oil Investing – The Need To Think Long Term 4

As someone who is invested in the oil space via ownership stakes in BP, Exxon Mobil and Royal Dutch Shell, I am not too concerned with the price of oil dipping below $50 in recent weeks. When I took stakes in these companies, I realised that the price of oil will not double overnight. I knew that it will take a considerable amount of time for oil prices to recover. But when the recovery starts, I expect prices to shoot higher and that is why I am optimistic about the oil industry long-term. Oil has a huge tailwind in the form of the emerging global middle class. Global Prosperity and […]


Are Brands Really A Competitive Advantage?

When it comes to analysing businesses, finding out if a particular company you are interested in has an economic moat (or competitive advantage) is one of the most important things. This is because firms with economic moats are able to earn outsized profits for long periods of time due to mean reversion not really affecting them. There are a number of economic moats to look for and if a company has one of these, you can be sure that the company in question will continue to earn higher than normal profits for a long time to come. One of the most common economic moats people look for is ‘Strong Brand […]