Investments

While in the world of farming, increased yield is certainly a goal for maximizing profit, in the investing world, the concept of “yield” is not consistent.

From a high level, investing might seem like a zero-sum game, like poker, but as much as these two areas share similarities, investing is much more than that.

What makes a good investor? While mastering the art of patience plays a role, it also comes down to learning and feedback.

The greatest issue with investing your emergency fund comes down to risk. If you’re willing to part with money in your emergency fund and know you will still sleep at night, that money doesn’t belong there.

What does Bo Jackson’s stardom have to do with finances? In 1989, he was Nike’s prime marketer for their cross-trainer shoe ad campaign, and as such, appeared to know it all when it came to sports (i.e. — “Bo knows”). However, much like your portfolio, Bo’s popularity is more complex than that.

Investment planning isn’t synonymous to gambling in a casino, but the two realms do share insight that can lend valuable lessons to today’s investors.

In the world of investing, critiquing prior financial choices is common, and is what economists refer to as “hindsight bias”.

Looking at today’s financial markets, “risk-free rate” is one of the easiest, most observable aspects to watch above the waterline.

There’s a reason recent Retire With Purpose podcast guest, Jeremy Siegel, has been called “one of the best stock watchers alive”. His long-term investing mentality means it all comes down to “time horizon when investing your money”.

As author Morgan Housel says, “The most important investing question is not, ‘What are the highest returns I can earn?’” Instead, “It’s, ‘What are the best returns I can sustain for the longest period of time?’”

In the world of investing, loss aversion is a cognitive bias which means your losses hurt twice as bad as any gains of the same value. It can be one of the most common (and challenging) hindrances to overcome in making sound investment decisions, and might also cause you to develop a case of “Get Even-itis”.

According to the 1950-era modern portfolio theory, volatility is the most appropriate measure for portfolio risk. It draws down to utilizing the statistical concept of standard deviation; but while this makes the metric mathematically simple and easy to estimate, it also carries some disadvantages.