The financial crisis of 2007-08 it was caused in part by an excess of savings over investment in the global economy. The acute effect of this was an unravelling of the financial system in 2008 and although that acute stage has passed, the chronic issue remains. That is, the natural real rate of interest in … Continue reading Why were interest rates so low even before the pandemic?
Author: tothepound
What is a bond ladder?
A bond ladder is where an investor invests in multiple bonds of different maturities so as to provide cash flows at regular points in time in the future. This can be done using coupon bonds or zero-coupon/discount bonds. The latter may be more tax-efficient because the pull-to-par is classed as a capital gain whereas coupons … Continue reading What is a bond ladder?
Funds can be classified in different ways
A helpful classification of active funds is by outcome or intended outcome. For example: capital growth, income, capital preservation, and liability-matching. The means by which the objectives outcomes are met might be of lower importance, but generally capital growth funds are likely to be all-equity or dominated by equities, income funds are likely to have … Continue reading Funds can be classified in different ways
What is a bull call spread?
A bull call spread is an options strategy used to express a positive or bullish view on the underlying asset, often a broad equity index. By using a spread instead of a naked option, both the profit and loss are limited, and the cost (or premium) for implementing the strategy is limited. The investor buys … Continue reading What is a bull call spread?
Tax evasion has always been illegal, but beware that tax avoidance might be too
Tax avoidance is the process of reducing the amount of tax paid, or increasing the efficiency of a client’s tax profile, through legal means. Tax evasion is reducing the amount of tax paid through illegal means. However, regulation is moving in the direction of encouraging tax compliance in the ‘spirit’ of the law as opposed … Continue reading Tax evasion has always been illegal, but beware that tax avoidance might be too
What does the ‘fundamental value’ of a stock mean?
Fundamental value for a stock is typically defined in terms of its power to generate cash flows. If we discount a company’s cash flows from the future to today at an appropriate discount rate (which should reflect the risk inherent in investing in stocks with similar characteristics to our company) then we can calculate an … Continue reading What does the ‘fundamental value’ of a stock mean?
What is a bear call spread?
A bear call spread is an options strategy used to express a negative or bearish view on the underlying asset, often a broad equity index. By using a spread instead of a naked option, both the profit and loss are limited, and the cost (or premium) for implementing the strategy is limited. The investor sells … Continue reading What is a bear call spread?
Beware false precision about the distinction between growth and value
Growth investing is based on the premise that some companies are predicted to grow their earnings substantially in the future, so investors are willing to pay more now for that future stream of earnings. This contrasts with value investing where investors typically try to identify stocks with a share price that is cheap relative to … Continue reading Beware false precision about the distinction between growth and value
Why was 2018 a difficult year for investors?
2018 was a difficult year for active managers. Equity market performance was concentrated in the US, and even within the US it was concentrated in the technology sector, and even within that it was concentrated in a small number of mega-cap tech stocks known as the ‘FAANGs’ (Facebook, Apple, Amazon, Netflix, Google, although Microsoft and … Continue reading Why was 2018 a difficult year for investors?
In one chart, our approach to making our portfolio more sustainable
To the pound 