Investing

Investing Know-How

Developing an Intuitive Feel for the Mechanics of Growth

Investment decisions and planning are all concerned in one way or another with one concept: Growth. Stock investors examine the earnings growth of firms; portfolio planners estimate portfolio growth. And ultimately growth in the real value of your assets is the central focus of your endeavors and concerns.

But most investors do not have an intuitive feel for growth, particularly over longer time periods. If someone were to say, for instance, that you can double your money in nine years or quadruple it in 18, most people would have no idea whatsoever of the annual growth rates that would produce those results [it would be 8% in both instances].

Needless to say, if you are completely in the dark when confronted with this issue, you have little basis for judgment.

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The Stock Market and the Media: Turn It on, But Tune It Out

Investors are faced with a daily barrage of business news. There's keen competition over who can break the story first. The clear inference is that the news matters-that keeping abreast of the news, especially as it relates to one's holdings, is one of the keys to investment success.

I disagree.  I believe one of the worst things that can happen to a long-term investor is to be instantly and totally informed about his stock. In most cases, spot news fades into irrelevance over time.

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