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Bias For Clarity

Bias for action. Gets things done. Go-getter. Traits companies big and small look for. And for good reason, you're being hired to do things! However, action is a secondary step that often overshadows the primary step, direction.   Clear direction is the foundation that enables our actions to takeoff. Without it, we're stuck in the mud.  Striving for clarity is an underrated skill. Having the courage to ask ( seemingly ) obvious questions, and to check in, making sure we're all on the same page. "O bvious " questions are a low risk, high reward way to add value. At worst, you'll add confidence to our actions. At best, you discover a misalignment that saves us from a dead-end.  The more people, the more clear we need to be. The bigger the initiative, the bigger the risk of reaching the finish line, only to realize expectations were off.  Success is always uncertain. But we can be certain about what we want and what everyone's job is. Things that can be clea

The Only Thing You Can Control

  In 2020 the global economy shut down. Even with the financial consequences, the S&P 500 is up 2% for the year. A year ago, no one saw a pandemic coming and a few months ago no one saw stocks recovering.  The world is unpredictable. The stock market, fuelled by the emotions of unpredictable people about our unpredictable world is many times more so.  Stock returns are volatile. This holds true for individual holdings and as well as diversified portfolios. Since inception, the S&P 500 has averaged a 10% annualized return. In its near 100 year history, there's only been a handful of times where it returned 10%. The average is nothing to count on.  You never know where stocks going. The smartest minds have tried, putting together sophisticated models to play fortune teller. Many have been burned doing so. Models are built with massive amounts of past data. Unfortunately, things that's never happened before happen all the time. Events like Black Monday (1987), the Great Fi

ELI5: Interest Rates & Bond Prices

Investors like to keep a close eye on interest rates, especially those who hold bonds. The two are closely related. When one goes down, the other goes up. This can cause some confusion. Shouldn't higher rates mean more valuable bonds?  New bonds are issued all the time. It can be weekly, monthly, quarterly - depends on the issuer.  Bonds are essentially loans to companies and governments, where in return investors are paid interest at a fixed rate. If rates rise, bonds issued prior to the hike will provide a lower return than their newer counterparts - becoming less valuable. When rates drop, old bonds will provide a higher return - becoming more valuable.  Let's say you purchased a 10-year bond with a par value of $1,000 and an interest rate of 4%, this equals to a return of $40 a year. If interest rates rise to 5%, new bonds will be paying investors $50 a year. 20% more than what your bond pays.  If you want to sell your bond, it'll be impossible to sell it for the $1000

Beware the Backtest

Backtesting is a popular tool amongst traders and marketers. Traders use it to experiment and uncover new strategies. When one looks promising, the marketers go to work! Creating fancy charts and graphs to sell you on hypothetical performance. But are strong backtests indicative of strong future results?

How Accurate Are Analyst Price Targets?

Analyst targets in theory can streamline a lot of trade decisions. Target price is higher than the current price? BUY! Oh, if only it was that easy.