Financial Calculators - More Harm Than Good? A Draining Tale

Posted by Carlos Sera on Jun 20, 2016 10:46:33 AM

I was recently at lunch with one of my long-time clients and her recent college graduate grandson.  We of course were talking about money and no money conversation is complete without a discussion about rates of return.  The grandson brought up the topic of financial calculators and that he had been playing around with them.  He wanted to know if they were something of value. 

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Topics: Volatility (finance), Volatile Tales, volatility drain, financial calculator

Why Diversification is Temporarily Broken: A What to Do Today Tale

Posted by Carlos Sera on Dec 23, 2015 9:32:00 AM

This tale is a major departure from my other tales.  The last time I actually made a market call was in October of 2008.  It was a bullish market call since it was clear to me that stocks were cheap, quality Blue Chip stocks were paying high and sustainable dividends, and the future of the stock market would be one of reduced volatility. 

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Topics: FINANCIAL TALE, Stock market, Volatile Tales

How Do Asset Classes Behave? A Practical Tale

Posted by Carlos Sera on Sep 29, 2015 1:00:00 PM

I named this tale A Practical Tale because after reading it I sincerely hope you gain something practical.  The subtitle is a tribute to one of my favorites–Janis Joplin.  In the lyrics to the song Ball and Chain she sings about how “It’s all the same ___day.”  After reading this tale I hope you learn that when it comes to investing in asset classes what truly matters is your ability to understand and answer this question: How do asset classes behave?  What matters in your pocketbook is your ability to understand the difference between Intra asset class investing and Inter asset class investing.  Intra asset class or investments within the same asset class are for the most par—All the same.  Inter asset class investing or within different asset classes are for the most part—very different.

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Topics: Tales, Volatile Tales

A Transformative Tale: "Like Us, There's More Than Meets the Eye"

Posted by Carlos Sera on Sep 3, 2015 1:01:00 PM

In A Practical Tale, we learned the importance of understanding the expected behavior of asset classes, which of course impacts the expected behavior of your portfolio.  We can be fairly certain that when it comes to asset class risk, which we define as how much money you can lose if you invested in an asset class at precisely the wrong time, asset classes will behave the same in the future as in the past.  In this tale, A Transformative Talewe will learn how to transform one type of asset class return into another.  This is called a transformation and thus the name of this tale.  We will specifically look at transforming bond returns to stock returns.  Please note that I don’t recommend that you try this at home.  I would leave this type of transformation to professionals but I write this tale so that you can understand once again the importance of assessing risk by focusing on the maximum draw down.

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Topics: Tales, Volatile Tales

An Alto Mar Tale: "The Maximum Draw Down"

Posted by Carlos Sera on Sep 1, 2015 12:50:00 PM

When I was in elementary school we would spend endless, countless, boring hours focusing on the three R’s: reading, writing and arithmetic.  While most can commiserate with my experience towards the three R’s, nowadays, I find myself focusing on The Three R’s of Investing: the Reward, the Risk and the Ratio.  Over the past 25 years, The Three R’s of Investing have helped me manage money for clients and here’s how they can help you.

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Topics: Tales, Volatile Tales

A Volatile Tale: "Does Volatility Affect My Investments?"

Posted by Carlos Sera on Aug 11, 2015 12:19:00 PM

Most people are psyched out by the word volatility. They shouldn’t be. A practical synonym for volatility is predictability. The less volatile something is when it comes to investing the more predictable it is. The more volatile it is the less predictable. We know that a safe investment such as a 1 year US government bond is less volatile or more predictable than a mutual fund that invests in stocks over the next year. We learned in A Tale of Anarchy about the mathematics of recovery and how it can bring ruin to those that lose too much of their initial investment especially if they have finite capital. This tale teaches us about a second potential danger to the retiree. It’s called volatility or predictability.

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Topics: Volatile Tales

An Average Tale: "The Good, The Bad and The Average"

Posted by Carlos Sera on Aug 11, 2015 12:14:00 PM

Understanding averages is an important part of understanding investing. Whenever you hear the word average you must train your mind to immediately ask the question, what happens when the average doesn’t come true? If you don’t you could be headed for trouble. This tale deals with what happens when a person only thinks in terms of averages and doesn’t understand what makes up an average.

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Topics: Volatile Tales

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