The difficulty of investing right now is that most people know which businesses are growing fast and have bid up the valuations on these stocks to the 30-40x earnings range so it is difficult to determine whether the inevitable P/E compression will be more than offset by the high earnings per share growth rate.
Elsewhere, many of the stocks that are attractively valued on a P/E ratio basis tend to have very low growth right now, thus making it unclear whether they’ll outperform their loftier valued counterparts.
I suppose this is always the tug-of-war that exists, but it seems especially heightened right now for two reasons: (1) high-growth stocks that used to trade at 25x earnings now trade at 35x earnings, making it less obvious whether one should just “shut up and write the dang check” and (2) the businesses with slow growth right now can’t rely upon the excuse … Read the rest of this article!
One of the most underrated ways that an individual can protect himself is by purchasing umbrella insurance. It is possibly the biggest no-brainer kind of insurance you can buy, simply because it allows you to avoid wipeout risk in exchange for a very modest sum.
For those of you unfamiliar, umbrella insurance is an insurance policy in excess of home insurance, auto insurance, boat insurance, etc., and it guards against freak accidents that would drive you into bankruptcy.
For instance, let’s say you’re on your honeymoon in Switzerland, and you crash your rental car into the CEO of Nestle, putting him on permanent disability. That would cost you millions of dollars. Most likely, that’s game over. You’re gonna lose your house, you’re gonna lose your assets, and you will be paying out a percentage of your assets to the Nestle man for the rest of your life. It’s not a … Read the rest of this article!
I very rarely write about mutual funds for two reasons:
(1) Normally, the kinds of companies that are stuffed in mutual funds (Johnson & Johnson, Wells Fargo, Chevron, Procter & Gamble) are the kinds of companies that I believe I have the ability to identify on my own, and
(2) I do not like the concept of giving someone else a permanent asset override on what I own. If you have a $300,000 common stock portfolio that someone else is managing for a 1% fee, you are paying them $3,000 each year ($250 per month) for the privilege of handling your money. That figure will only go up as your assets increase. Why voluntarily give up that kind of wealth from the offset if you don’t have to?
With that said, there are some good mutual funds out there, and I’d like to highlight one of … Read the rest of this article!