Investing Basics
An index fund follows a rule rather than making a forecast
Tracking an index means holding what the index defines, in the proportions it specifies, which removes…
· 3 min read
Investing Basics
The first principles, with the risks stated as plainly as the returns.
Investing Basics
Compound growth rewards time more steeply than it rewards rate
Growth applied to growth is a multiplication problem, so the number of years enters the sum as an exponent while the rate only enters as a base.
Investing Basics
Charges are deducted whether or not anything was earned
A percentage taken every year is a certainty in a process made of estimates, and over a long horizon it…
· 4 min read
Investing Basics
Diversification removes one kind of risk and leaves another standing
Spreading money across many holdings reduces the damage any single one can do, but it cannot reduce the…
· 4 min read
Investing Basics
A fall and its recovery are not the same size
Percentages are taken from different bases on the way down and the way back, so returning to the starting…
· 4 min read
Investing Basics
Risk means one thing to a saver and something else to an investor
The same word covers the chance that a balance falls and the chance that it fails to keep up, and the two…
· 3 min read
Investing Basics
The horizon is the variable that constrains everything else
How long money can be left alone determines what can sensibly be done with it, more decisively than…
· 3 min read
Investing Basics
Past performance is a small sample and a noisy one
A record of returns is real information about what happened and a weak guide to what happens next, because…
· 3 min read
Investing Basics
A mixture drifts, and rebalancing is the rule that pulls it back
Holdings that grow at different rates change the proportions of a portfolio without anyone deciding…
· 3 min read
Investing Basics
Putting a lump sum in at once and feeding it in gradually answer different worries
Spreading an investment over time reduces the consequence of choosing a bad moment and, on average, gives…
· 3 min read
Investing Basics
When your job and your savings depend on the same thing, you own it twice
Concentration is not only about holding too few investments; it is about holding investments that would…
· 4 min read
Investing Basics
What an adviser does depends a great deal on how they are paid
The service, the obligations and the incentives attaching to financial advice differ by arrangement, and…
· 4 min read