Archive: Risk Posts

The Dangers of ETFs (And Why You Should Avoid Them)

It’s not unusual for my phone to ring in the wake of a financial crisis.  May 6, 2010 was one of those days. Around 2:30 that afternoon, the Dow Jones Industrial Average plunged nearly 1,000 points, only to recover all of those losses 36 minutes later. During the tumult, many exchange-traded funds (ETFs) were priced

Sir Isaac Newton: Brilliant Physicist. Miserable Investor.

Sir Isaac Newton

At Holcombe Financial’s recent client learning event about “Behavioral Biases and Their Investment Limitations”, my favorite story was about Sir Isaac Newton’s early investment success and subsequent failure during the South Sea Bubble.  In 1720 Newton profited handsomely, earning £20,000 by the time he sold his shares (big bucks in those days).  Sounds like an expert

Never A Good Time To Invest

The last five years have been nothing more than spectacular for those that endured the stock market collapse of 2008-09.  Now we find ourselves six years post crash, market performance is at record highs and the rumblings of fear have returned. The chart below tracks the MSCI World Index along with select Time magazine headlines

Intelligent Error

There are distinctive patterns in the errors people make. The reasons for this are many. Daniel Kahneman in his excellent work “Think Fast and Slow,” takes his reader down a thoughtful path to uncover how and why we make decisions – how and why we make the same mistakes over and over again. Kahneman explains

Shooting a Fly with a Shotgun

Once success happens you can no longer say, “I will continue my life now as it was before.” Tennessee Williams in his masterpiece, “The Catastrophe of Success,” lays out a manifesto for the wealthy. His writing is neither flattery of wealth nor demeaning of the trappings that follow. Instead, he points to the mindset that

Financial Physics – Part IV

The Safety Net As mentioned in Part III, either we reinvent old ideas (Madonna) or come up with brand new ones. Either way, the market requires we constantly adjust. In this our last installment of financial physics let’s discuss the importance of preparing for change, especially the change you don’t want to happen. I hate

Financial Physics – Part II

Never pay fixed bills with variable money In the second law of financial physics, we move our discussion to the importance of understanding cash flow. In my years of advising clients, I have noticed one main difference between those that find perpetual peace and those who don’t. It all lies in how they pay their

Controlling the Uncontrollable

When you really think about it, the only thing absolutely outside of our control or influence is the weather. The weather does whatever it wants to do, whenever it wants to do it. All we can do is respond – but is this really all? In his forthcoming book entitled, “Why Not You?”, author Rich