Ilucidy

Ilucidy has 150+ articles on a variety of investing topics, ranging from value investing, the fear of missing out, and the application of engineering risk methods to assess investment risk. With new articles being posted every week, there's always something new to learn. For more, follow "@ilucidy_hq" on Instagram!

Assessing financial data, judging management competence, and trying to predict industry prospects are all core aspects of investing. Not much debate there. Although these elements are indeed part of investing, it’s easy to forget the human element as well. In the book “Invested: Changing Forever the Way Americans Invest”, author Charles Schwab mentioned that every investor must maintain a healthy sense of optimism. After all, what’s the point of giving up money today if you aren’t hopeful that you’ll receive more in the future? Although it’s not immediately obvious, every investor is hopeful that tomorrow will be even brighter than today. In a sense, investing is a prolonged test of someone’s optimism. . . . #optimistic #optimism #moneymanagement #dividends #securities #bonds #stocks #mutualfunds #indexfunds

It’s very easy for an investor to convince themselves that their investment strategies are perfect and that their portfolios are flourishing. However, how can an investor determine if they’re as successful as they claim to be? By measuring portfolio performance, of course. Numbers never lie, so the best way to really understand if your investment plans and strategies are working is to know the numbers. If your portfolio’s market value is consistently below book value, or if your annual growth rate is constantly negative, then maybe it’s time to re-adjust whatever plans and strategies you are currently using because clearly, they aren’t as effective as you think they are. . . . #investingstrategy #strategicthinking #strategy #investinggoals #investingplans #capitalmarkets #finance #stocks

Investors work with numerical data all the time. The sheer quantity of numbers contained in the balance sheet, income statement, and cash flow statement is enough to overwhelm any investor. Studying numerical data is part of any investor’s analytical work, but how exactly can insight be extracted from what seems like a jumbled mess of unrelated numbers? By using appropriate investment ratios and metrics, of course. Ratios and metrics are so powerful because they relate numbers to one another. Trends that would otherwise go undetected are made clear by ratios and metrics. Take the price-to-earnings (P/E) ratio for example. By relating stock price and earnings per share, this ratio can help an investor determine if they are overpaying for a stock or if the purchase price is sensible. Not bad for a ratio that compares two seemingly disparate sets of data. Investors can stare at raw data all they want, but they won’t get very far until they start comparing numbers using appropriate investment ratios and metrics. . . . #investmentanalysis #cfa #cpa #accounting #finance #investing101 #investingeducation #investingtips

Some investors believe in the idea of “permanent investments”. That is, investments that will never have to be sold. While many investors choose to hold certain assets for several years (and sometimes, decades), it would be naïve to think that no assets will ever have to be sold. Economic realities and market conditions change every day. Investments that seemed bulletproof yesterday may be the ones dragging down your portfolio returns tomorrow. An investor should never disregard the possibility of one day needing to sell. Holding on to assets that are clearly detrimental to your portfolio will only hurt you over the long term. . . . #assets #financialassets #assetmanagement #assetallocation #diversification #portfoliodiversification #portfolio #portfoliomanagement #investing101

Some investment pundits are quick to praise bonds as “safe” and label stocks as “risky”. But what exactly determines the “safety” of a financial asset? A financial asset’s value is derived from the contractual claim behind it. A bond’s contractual claim is that bondholders receive intermittent interest payments and will eventually get their principal back. A shareholder’s contractual claim is that they can partake in a company’s profits by receiving dividends – if the Board deems it appropriate, then the dividends received can be increased. If a bond issuer cannot honour their contractual obligation of paying interest and repaying the principal, then any notion of “safety” is immediately void. A bond issuer that cannot meet its obligations poses a serious risk to an investor. Conversely, a stock that has never missed its dividend payments, and can comfortably keep paying dividends for years to come, is arguably a safe asset because the underlying contractual claim is secure. . . . #stocks #bonds #stockinvestor #stockinvesting #capitalmarkets #financialmarket #credit #finance

Whenever we’re faced with any sort of problem, one of the first questions that crosses our mind is “What do I need to do to resolve this problem?” It seems that society’s favourite approach when it comes to problem-solving is to throw as much time, effort, energy, and money at the problem until it eventually goes away. But is more action really the key to solving all our problems, especially ones pertaining to investing? There are instances in investing when taking more action simply exacerbates problems. A classic example is panic selling – panic selling in a volatile environment won’t magically make the volatility cease. Contrary to popular belief, choosing to “wait and see” is a valid approach that investors can take. Massive action isn’t the key to solving all investment problems. . . . #bonds #stocks #indexinvesting #indexfunds #nyse #nasdaq #djia #dowjones #stockmarket

It’s no secret that investors work with data all the time to help them make informed decisions. Whether it’s going through annual reports, press releases, or financial statements, there’s no shortage of material for investors to study and scrutinize. Because investors go through so much data and weigh several options, it’s entirely possible for them to encounter analysis paralysis. With so much to assess, it’s easy for an investor to be overwhelmed and make no decision at all, sometimes out of the fear that the decision needs to be perfect. Investors need to remember that no decision is “perfect” – every decision has its pros and cons, but this is the reality every investor must deal with and accept. An imperfect decision that ultimately advances an investor’s goals is much better than spending countless hours trying to make the “perfect” decision. . . . #analysis #investmentanalysis #analysisparalysis #investmentdecisions #investing101 #stocks #stockmarket #stockinvestor

Recall the last time you had a major choice to make. Before you finally arrived at a decision, how much information did you need to consider before finally making a choice? Almost all investors have excellent analytical skills, but even the most skilled investors can’t possibly hope to form a conclusion if they are forced to work with low-quality sources of information. Investors today can access virtually all the information they want with just a few clicks, but not every source they come across will contribute substantially to their analysis. The onus rests on investors to make sure the information they collect is high-quality. A handful of first-rate sources of investment information will contribute more to an investor’s analytical work than hundreds of mediocre ones. . . . #decisions #decisionmaking #moneymanagement #capitalmarkets #stockmarket #stockinvestor #mutualfunds #hedgefunds

It’s often said that mistakes are some of life’s greatest teachers. Some of the most important lessons we learn are from our shortcomings. Naturally, no investor is perfect, so it’s only a matter of time before a mistake is made. However, investing is one of the few activities where people should try to make the least mistakes possible. Some investment mistakes are relatively inconsequential, however, there are some that have the potential to decimate an investor’s portfolio and personal finances. A few, very big investment mistakes can land an investor in a financially precarious situation. Learning through trial and error may work in other endeavours, but taking a “trial and error” approach in investing usually results in lost time, money, and energy. . . . #investingmistakes #investingtips #investingadvice #investing101 #finance #capitalmarkets #financialmarket #stockmarket