There are people in this country that make 401(k) investments by bringing up a comparative chart of the last year, three-year, five-year, and ten-year performance, and then making automatic paycheck contributions based on what had been the hottest performers over that period of time. If you don’t enjoy spending a lot of time thinking about investing, it has a certain intuitive appeal: Why not go with the five letters that can report 10% annual returns from 2004-2014 rather than the five letters attached to a 3% annual return?
The problem is this: you could performance-chasing. A fair amount of time, the reason why a particular mutual fund has done well is because the … Read the rest of this article!
You may have noticed that on the right bar of the site, I have added a link to Dr. Thomas Stanley’s excellent book “The Millionaire Next Door” (full disclosure: if you click on the book and purchase it, I receive a commission). But even if you don’t buy it, it’s cool if you go to the library and check it out, as the important thing is that you read it.
It really becomes apparent that there is a difference between being rich and appearing rich. This whole image that being affluent is about spending money recklessly and only buying high-end ridiculous consumer goods is completely out of line with the reality of those … Read the rest of this article!
I was recently studying the terrible record of financial institutions when it comes to repurchasing their own stock—I read that AIG, Citigroup, Lehman Brothers, Bank of America, Merrill Lynch, and Countrywide combined to repurchase over $100 billion of their own stock respectively before the financial crisis, which then got reduced to a little over $18 when you size up what remains after the financial crisis. Obviously, those are the obvious examples of when stock buybacks go wrong.
But still, the art of the buyback is something that very few companies can get right on a consistent basis, because the times when companies are flush with cash tend to be during prosperous economic times … Read the rest of this article!
Sick of the commodities posts yet? No? Good, because that’s what is cheap right now. Let’s cover I don’t think we’ve discussed here before—BHP Billiton, the most diversified materials producer on the globe. It’s a niche long-term holding—like Tiffany, Disney, and Berkshire Hathaway—in that there are not a lot of peer companies from which you get to choose. If you want a long-term alcohol company in your portfolio, you can choose from Anheuser-Busch, Heineken, SABMiller, Molson Coors, Diageo, Brown Forman, and probably more, but I’m going off the top of my head.
BHP Billiton is unique in that it produces iron ore, nickel, natural gas, oil, diamonds, coal, and steel. It has a … Read the rest of this article!
Collecting $10,000 in annual dividend income from a $10,000 initial investment is the holy grail of income investing. More broadly, collecting annual income equal to the amount you invest is almost always a signal of an investment well-chosen. Assuming you get there within two or three decades, it represents an extremely efficient use of capital that comes with a huge margin of safety because you can re-allocate the dividends to new investment opportunities, continually extracting the amount of money you put at risk from your labor into a business enterprise.
I want to talk about such a golden goose that rarely gets discussed: Buckeye Partners, one of the greatest energy partnerships in the … Read the rest of this article!