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.

Fundsmith 2020 Full Annual Letter To Shareholders

The eagerly anticipated annual letter to shareholders from Fundsmith has been released today, Wednesday 20 January 2021. Much like Warren Buffets annual letter has become compulsory reading for any aspirational investor, so too has Terry Smith writings. And it hasn’t disappointed. Smith has given his thoughts on the pandemic as well provided trends that have been accelerated as a result   Fundsmith produced another barnstorming year in 2020 delivering returns of 18.3% far outpacing the benchmark. Since inception roughly 10 years ago, the cumulative returns have been 449.3%! No wonder fundsmith is one of the only funds I invest in.    Looking at the Fundsmith portfolio, it is no surprise […]

Investing In Quality Companies Requires Long Term Thinking

Shares in quality companies often trade at a premium. Investors, myself included, often bulk at the valuation these best in breed businesses trade at and often forgo buying shares in them as a result. But if history has taught us anything, it is that quality shares are often worth paying up for. Even at the higher valuation ratings, these companies consistently beat the markets. Professor Jeremy Siegel, in his book the The Nifty-Fifty Revisited showed retrospectively that a high quality, well-branded company such as Coca-Cola, with a steady earnings growth record could in fact support extremely high multiples – even higher than Coke?s then PE of 46x. A year or […]

Signal Messenger App Share Price – Are Investors Blinded?

The rise of fee free stock trading apps such as Freetrade have been a boon for investors. They have democratised investing by giving everyone a chance to invest in the stock market and own the best businesses in the world.   But like with most things, they are certain drawbacks. I feel the ease of use and the free nature of these apps, coupled with lockdowns, boredom and economic pains have allowed gamblers to enter the stock market. They are bidding up anything and everything. They are treating investing in the stock market like it’s a game cheering every up move in the stocks they invest in without giving a […]

2020 – A Year In Personal Finance & The Markets

What A Year 2020 Has Been. It has been a year full of bad news. It started off with bush fires raging across the world. From Australia to Brazil to California. There was trade escalations between the US and China. And who could forget the rising tensions in Iran which could have led toWW3. To think all that occurred just in the first month is crazy. If there was anything that was going to top that for the rest of the year, it had to be spectacular.     Yet when we remember 2020, we will hardly remember the above mentioned things. For it will be remember as the year […]

Why The Stock Market Is At Record Highs

Markets are at record levels. Well in the US at least. Considering we’ve just had a year of economic shutdowns and huge falls in outputs, that is simply incredible. We have witnessed the worst economic crisis since the 1930s Great Depression. According to the United Nations, The World Bank and the International Monetary Fund, global GDP in 2020 is expected to contract by around 5 per cent. This is equivalent to wiping out nearly 1 billion full-time equivalent working hours and $28 trillion in lost economic output over the next two years. That is truly unprecedented.   So it definitely worth asking the question, why are stock markets are record […]

Big Business – The Lockdown Winner

I find it amazing. The same people who dislike big business, gentrification and everything capitalism are the same people voting for lockdowns. They are unaware that lockdowns transfer power and wealth to the companies they hate. They are unaware that lockdowns are killing small businesses whilst increasing the profitability of big business. They are unaware of the consequences of the lockdowns they are demanding.   
Now, before I go any further, I am not here to debate whether lockdowns are correct or not, both from a health and political point of view. I am just here to put across the facts about the economic effects and the changing landscapes as […]

Investing For Growth – Terry Smith Book Review

There doesn’t seem to be any Rockstar portfolio managers these days. Gone are the days where the city was littered with household names, Antony Bolton, Neil Woodford, John Templeton. Active management is dying. Everyone’s shifting to passive and the ETFs are winning out. Yet there seems to be only one Rockstar portfolio manager left these days; Terry Smith.     For those in the know Terry Smith needs no introduction. But for the benefit of others, I hash over his background here.   Terry smith graduated from University College Cardiff with a degree in history (it’s strange how many successfull portfolio managers have a degree in the arts!). From there […]

Don’t Look At The Most Popular Stocks List

The types of articles I absolutely hate seeing go along the lines of ‘ the most popular shares in February’ or ‘the most popular stock in month.’ Brokers are prone to publishing these types of articles on their websites every month. The reason is probably these articles get a whole lot of views but the problem is they can be very misleading, especially for beginner investors. Whenever I read these types of articles, I ask myself ‘how can a stock be popular?’ After all, for every buyer there is a seller.   When you see an article detailing popular shares, you need to understand the underlying facts. You need to […]

The Link Between Interest Rates And Stock Prices

“ In finance, one of the most fundamental laws we have is that the level and movement of interest rates will almost universally affect asset prices, with higher rates pulling down prices like the force of gravity, to use Warren Buffett’s simile. The Fed’s communications regarding lower rates have therefore caused market participants to start valuing the earnings streams of companies, and therefore their shares, at higher levels. This will affect companies not just in the US, but all over the world, because not only do we operate in highly integrated global financial markets, but US interest rates also happen to be used as a reference rate across all of […]

Investing in Companies that have a History of Paying Reliable Dividends

Why Invest in Dividend Stocks?   Investing in dividend stocks is an effective strategy for building and sustaining wealth in the long term. Dividend stocks form an integral part of a well-diversified portfolio. They help investors generate regular short-term income, long-term capital appreciation, and fight uncertainty and volatility in the markets.   As I have mentioned earlier, dividend stocks generally belong to well-established companies with sound business models and proven success. They play a vital role in the long-term success of investors and their investment portfolios. The dividend stocks have been able to generate above-average annual returns and exceed the broader market returns.   And, who can deny the power […]