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Doom and Bloom, Recession or Nah?

We're in the mist of a  decade-long  bull run, one of the most impressive stock market rises in history. When times are booming, doomsday predictions tend to dominate the headlines. "Markets hit all-time-high, sign of an oncoming collapse?" "A recession is overdue, we're getting closer." Yes, as time passes we get closer to the next recession. It's very easy to say we're closing in on something because that's how time works. The difficult part is knowing exactly when it'll happen. People are terrible at predicting recessions. Paul Samuelson (Nobel prize winning economist), in 1966 joked that declines in U.S. stock prices had correctly predicted 9 of the last 5 American recessions, and his profession would kill for such accuracy. A study by the IMF found from 1992-2014, of 153 national recessions, only 5 were predicted by a consensus of private-sector economists in April of the previous year. That's ~3% success rate. At the

Don't Be A Bad Doctor, Have Some Patience

Reading a book won't make you a genius, eating a salad won't get you abs and buying a stock won't make you a millionaire. Successful investing ( like success in most fields ) require time and repetition. Nothing worthwhile is achieved quickly. Patience unlocks the power of compound interest. Investors who save and invest regularly in an appropriate portfolio will experience extraordinary growth over time. The ability to think long-term is one of the few advantages that individual investors have over professionals. Professional fund managers have massive advantages over individuals ( information, technology, manpower, etc. ), but they don't have the luxury of being able to think long-term. Most fund managers report performance quarterly and they want to show strong results every single time . They act for the short-term -  impatient investing . Impatient investing involves active trading. As we've discussed before, trading is very hard. Impatient investors s

Can You Handle The Risk? Understanding Your Risk Tolerance

The risk of losing money is understandably a big fear for investors. Investing is a great way to grow your wealth, but there's a tradeoff. The opportunity for your investments to rise is accompanied with the risk they might fall ( risk and reward ). Everyone's ability to handle risk is different, a risk-appropriate portfolio is key to successful investing. Investors taking on too much risk are likely to make poor decisions under pressure ( like  JR Smith  in the NBA Finals ). Investors who are too conservative are limiting their growth potential. Most portfolios are built with a mix of stocks and bonds. Stocks are typically riskier and provide greater returns, bonds are typically more stable and provide lower returns. A  paper  by PWL Capital found that stocks had an expected return of 7% and a standard deviation of 11.4%, while bonds had an expected return of 3.3% and a standard deviation of 3.9%. Standard deviation is the degree that returns deviate from the annual av

You Pay Rent, You Pay Rent, Everybody Pays Rent

One of the major reasons people strive for a fully paid off house is the dream of living rent-free. The idea that homeowners don't pay rent is somewhat true,  like golf being a sport . Rent is money exchanged to use something without receiving  residual value . A familiar example is paying your landlord to use their property. You get a place to live, but when your lease is over, you don't own anything. This is explicit rent, it's obvious and easy to calculate. Another, less obvious type of rent is implicit rent. Implicit rent is not directly paid to anyone. It's expressed and paid in the form of opportunity cost. Opportunity cost is the cost of choosing one option and forgoing another. Like when the Portland Trailblazers decided to draft Sam Bowie (choice) ahead of Michael Jordan (opportunity cost). As a homeowner, you have a lot of capital tied up. Your capital could've instead be invested in the stock market. The growth you could have experienced is your