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Educational Series: Simplifying Complex Investment Theories for Better Understanding In an era marked by information overload & complex financial markets, understanding the core principles of investment theories is paramount for investors, fund managers, RIAs, and family offices alike. 1. Modern Portfolio Theory (MPT): At its heart, MPT is about achieving the best possible return for a given level of risk. Simplified, it suggests diversifying your investment portfolio across various assets to reduce risk without sacrificing potential returns. Think of it as not putting all your eggs in one basket but spreading them across several baskets to minimize the loss if one falls. 2. Efficient Market Hypothesis (EMH): EMH proposes that stock prices reflect all available information, making it impossible to consistently achieve higher returns. In simpler terms, it argues that beating the market is largely a matter of luck rather than skill, emphasizing the importance of passive investing strategies like index funds. 3. Behavioral Finance: This theory acknowledges that investors are not always rational and that psychological influences can impact investment decisions. Simplifying this, it’s essential to be aware of emotional biases (like fear of missing out or reluctance to accept losses) that might lead you astray and focus on long-term investment strategies instead. 4. Dividend Discount Model (DDM): DDM values a stock by predicting dividends and discounting them back to their present value. Essentially, it’s like calculating the present worth of all the money you expect to receive from an investment, emphasizing the importance of future cash flows in determining an investment's value today. 5. Capital Asset Pricing Model (CAPM): CAPM helps in determining the expected return on an investment, considering its risk relative to the market. It simplifies to the idea that the riskier an investment, the higher the expected return should be to make it worthwhile. 6. High Yield Low Risk Model (HYLR): HYLR is typically achieved with a synergistic combination of multi-asset classes of investments to provide investors & fund managers with the ability to move quickly to mitigate national, regional & even local risks while simultaneously achieving higher returns than a single asset class investment would bring. Conclusion: While investment theories can seem daunting, their core principles are grounded in common sense: diversify to manage risk, be wary of market unpredictability, understand the psychological factors at play, value investments based on future benefits, and align expected returns with risk levels. By simplifying these theories, we not only make them more accessible but also empower ourselves with the knowledge to make smarter, more informed investment decisions. Let's continue to demystify the complex world of investing together. By Scott Stellmon #InvestmentTheories #FinancialLiteracy #PortfolioManagement #BehavioralFinance #InvestingBasics

The biggest myth about investment One thing that holds us back from starting to learn investment is: ▶️ I don’t have big capital. It is what most people will doubt: "If I only have $100,000, 10% return is only $10,000, this return can't even pay my bills, then why should I learn investment?" ========== Human psychology is interesting. When we don’t have full clarity, we don’t want to do things now, we want to wait when we need it. And when we need it, we normally miss the best timing to start. I understand many people think they don’t have a lot of money now. So they think learning investment is not very beneficial at this time. Or they want to fully focus on business and career. They wait for themselves to be more successful and make a lot of money, then they come back to learn about investment. If you wait until you have a large amount of money, to start learning investment, you are not at optimum. The truth is you will be scared of doing investment by yourself, because you are afraid of losing that large amount of savings. I always said that investment is not about knowledge, it is about emotion. Knowledge is the easiest part. The real knowledge is very simple. I did this multiple times. I only need to spend less than 2 hours sharing the most important knowledge you need to know in a very simple way. And you will be good to go to start investing. Although it takes time to apply and really master it. ========== Investment is never too early. Starting earlier has great advantages to fast-track the emotion learning. One thing I am grateful about is that I start investing relatively early. When we start early, we normally have less capital, and losing some of it will already make us feel uncomfortable. When I make $1000, and lose $1000, it is painful enough for me to experience the lessons. But when I master investment, and my income grows, it is where the wealth grows crazy. It is the best leverage I could think of in investment. I called this leverage as time leverage. Minimal risk, unlimited potential. You leverage your current time to learn investment as early as possible. And this leverage will multiply your income and wealth, and double triple the effect every time you make more income and have more wealth. ========== The skills and experiences of investment is your best leverage in investment. Don’t wait to start learning investment, it costs you more in the long run. Everyone can master finance & investment. It doesn’t cost you a lot of time to do it. You don’t need to spend a decade like me, to master it. You can leverage my experience and start from there. Comment or PM me your biggest challenges to start investment. We can share thoughts with each other. ---- Thank you for reading! 📌 My name is Eric Lee. I’m an investor who went through all kinds of good & bad experiences, survived and thrived. I shared my stories & experiences, to inspire & help you fast-track your journey.

Negative message is part of investment, it's one of my key learning in my investment career for nearly 30 years. I have found a very peculiar thing -- Investors do not like negative message and are accustomed to hiding evil and promoting good. Human nature Of course, I understand that this is part of human nature.

"Younger people don't know what Institutional investing was like before the 1950s; we would sit around and have discussions as you see on television, like, I think this industry, or I think there's some company and somehow we would cobble together a portfolio. But now we have a process."(1) Diversification is a principle rooted in Shakespeare's "The Merchant of Venice," and echoes through Antonio's words: "I thank my fortune for it, My ventures are not in one bottom trusted, Nor to one place, nor is my whole estate Upon the fortune of this present year". Until a pivotal moment, the investment industry adhered to common sense and heuristic techniques as standard practice. This moment marked the beginning of a journey for Markowitz, a Ph.D. student deciding on his dissertation topic. Little did he know that his work would revolutionise the investment process for a long time to come. Markowitz went to his thesis adviser Marschak to discuss picking a dissertation topic. In the waiting room, Markowitz had a chat with a stockbroker who suggested applying mathematical econometric models to the stock market. At the time, investments were an uncharted territory for Markowitz. Later at the Chicago Business School library, Markowitz, drawn into John Williams’s "The Theory of Investment Value," pondered the assumption of non-correlation between stocks implying that putting all eggs in the basket of one high-return stock maximized gains. Sceptical, Markowitz shifted focus to investment portfolios, understanding how to calculate their average return but puzzled by measuring combined risk. A eureka moment occurred when he stumbled upon J. V. Uspensky’s "Introduction to Mathematical Probability," and discovers the technique to calculate the weighted sum of variance by including the covariance term. This revelation birthed the portfolio variance formula, demonstrating that a portfolio's risk isn't just a sum of its parts but a dance of stocks with one another, forever altering investment strategy by highlighting the vital role of diversification in managing overall risk. Following this, a complete framework of risk-return optimisation known as the mean-variance model (MV) was born. The MV framework was the first mathematical formalisation of the concept of diversification. Peter L. Bernstein's quote above was the moment when Markowitz realized the significance of his work. His moment in the library changed the investment process forever. Coupled with his conversation with the stockbroker, it put him on the path to winning the Nobel Prize. Elegantly Markowitz applied Antonio's logic in The Merchant of Venice, Act I, Scene I, William Shakespeare. "I thank my fortune for it, My ventures are not in one bottom trusted, Nor to one place, nor is my whole estate Upon the fortune of this present year". (1) Markowitz in the pursuit of the perfect portfolio interview quoted Peter L. Bernstein's comment. #Finance #ModernPortfolioTheory #FinancialTheory

🚀 Exciting Milestone Achieved in My Investment Journey: Sharpe Ratio Hits 1.00 on StockTrak!🚀 Just a few days ago, on May 7, my portfolio's Sharpe ratio was at 0.366, and today, I'm thrilled to report a significant leap to 1.00! This remarkable improvement reflects not just an enhancement in risk-adjusted returns but also a testament to the strategic recalibration of my investment approach. As a proud first-generation immigrant and the first in my family to attend college, diving into the world of investments for the first time was no small feat. From stocks to ETFs and futures, every step has been a leap toward understanding and mastering the financial markets. 🔍 Understanding the Sharpe Ratio: The Sharpe ratio measures the performance of an investment compared to a risk-free asset, after adjusting for its risk. It is calculated by subtracting the risk-free rate from the return of the portfolio and then dividing by the standard deviation of the portfolio returns. A Sharpe ratio of 1.00 or higher is often considered excellent, indicating that the investment is generating substantial returns per unit of risk. 📈 Strategies to Elevate Your Sharpe Ratio: 1. Diversification: Diversifying your portfolio across various asset classes and sectors can reduce volatility and improve returns, enhancing your Sharpe ratio. It's not just about owning different stocks, but also incorporating bonds, commodities, or real estate where appropriate.    2. Incorporate Low-Volatility Instruments: Adding low-volatility stocks or funds can stabilize your portfolio's performance and reduce standard deviation, which can significantly boost your Sharpe ratio. 3. Tactical Asset Allocation: Regularly adjusting your portfolio's composition based on market conditions and performance analytics can help manage risks more effectively and capitalize on higher returns. 4. Utilize Derivatives for Hedging: Consider using options or futures to hedge against potential losses in your portfolio. Hedging can help maintain your returns while reducing potential downside, thus improving your Sharpe ratio. 5. Performance Monitoring and Continuous Learning: Keep a close eye on the performance metrics of your investments and the overall market. Educating yourself about financial markets and investment strategies continuously can provide insights that lead to better decision-making. As I climb higher in the rankings on StockTrak, each strategic move brings me closer to mastering the balance between maximizing returns and managing risk. This journey is not just about competing, but about learning and applying key financial principles in a practical, risk-free environment. Stay tuned for more updates and insights as I aim to refine my portfolio management skills further and pursue even greater achievements! #StockTrakSuccess #InvestmentStrategy #SharpeRatio #FinancialLiteracy #RiskManagement #PortfolioOptimization #MarketInsights #FinanceEducation #InvestSmart #WomenInFinance

📚 𝟱 𝗘𝘀𝘀𝗲𝗻𝘁𝗶𝗮𝗹 𝗕𝗼𝗼𝗸𝘀 𝗳𝗼𝗿 𝗜𝗻𝘃𝗲𝘀𝘁𝗼𝗿𝘀: 𝗜𝗻𝘀𝗶𝗴𝗵𝘁𝘀 𝗳𝗿𝗼𝗺 𝗠𝘆 𝗥𝗲𝘀𝗲𝗮𝗿𝗰𝗵 📚 In the world of finance, continuous learning is key to staying ahead. Here are five crucial books that can enhance your investment strategies and mindset, based on my personal analysis: "𝗧𝗵𝗲 𝗜𝗻𝘁𝗲𝗹𝗹𝗶𝗴𝗲𝗻𝘁 𝗜𝗻𝘃𝗲𝘀𝘁𝗼𝗿" 𝗯𝘆 𝗕𝗲𝗻𝗷𝗮𝗺𝗶𝗻 𝗚𝗿𝗮𝗵𝗮𝗺 📖 𝗪𝗵𝘆 𝗜𝘁 𝗠𝗮𝘁𝘁𝗲𝗿𝘀: Graham's principles of value investing provide a robust framework for evaluating stocks and managing risks. His timeless advice helps investors build a solid foundation in investment philosophy. 𝘌𝘹𝘢𝘮𝘱𝘭𝘦: Use Graham’s approach to assess undervalued stocks in today's market. "𝗖𝗼𝗺𝗺𝗼𝗻 𝗦𝘁𝗼𝗰𝗸𝘀 𝗮𝗻𝗱 𝗨𝗻𝗰𝗼𝗺𝗺𝗼𝗻 𝗣𝗿𝗼𝗳𝗶𝘁𝘀" 𝗯𝘆 𝗣𝗵𝗶𝗹𝗶𝗽 𝗙𝗶𝘀𝗵𝗲𝗿 📖 𝗪𝗵𝘆 𝗜𝘁 𝗠𝗮𝘁𝘁𝗲𝗿𝘀: Fisher’s focus on qualitative analysis and management quality offers a unique perspective on long-term growth potential. 𝘌𝘹𝘢𝘮𝘱𝘭𝘦: Apply Fisher's criteria to evaluate the innovative potential of tech startups. "𝗔 𝗥𝗮𝗻𝗱𝗼𝗺 𝗪𝗮𝗹𝗸 𝗗𝗼𝘄𝗻 𝗪𝗮𝗹𝗹 𝗦𝘁𝗿𝗲𝗲𝘁" 𝗯𝘆 𝗕𝘂𝗿𝘁𝗼𝗻 𝗚. 𝗠𝗮𝗹𝗸𝗶𝗲𝗹 📖 𝗪𝗵𝘆 𝗜𝘁 𝗠𝗮𝘁𝘁𝗲𝗿𝘀: Malkiel’s overview of investment strategies and market efficiency emphasizes the importance of diversification and informed investing. 𝘌𝘹𝘢𝘮𝘱𝘭𝘦: Use Malkiel’s insights to create a balanced portfolio that mitigates market risks. "𝗥𝗶𝗰𝗵 𝗗𝗮𝗱 𝗣𝗼𝗼𝗿 𝗗𝗮𝗱" 𝗯𝘆 𝗥𝗼𝗯𝗲𝗿𝘁 𝗧. 𝗞𝗶𝘆𝗼𝘀𝗮𝗸𝗶 📖 𝗪𝗵𝘆 𝗜𝘁 𝗠𝗮𝘁𝘁𝗲𝗿𝘀: Kiyosaki’s book challenges traditional views on money and financial education, offering practical advice on personal finance and investing. 𝘌𝘹𝘢𝘮𝘱𝘭𝘦: Leverage Kiyosaki’s principles to develop a more proactive approach to wealth-building. "𝗧𝗵𝗶𝗻𝗸𝗶𝗻𝗴, 𝗙𝗮𝘀𝘁 𝗮𝗻𝗱 𝗦𝗹𝗼𝘄" 𝗯𝘆 𝗗𝗮𝗻𝗶𝗲𝗹 𝗞𝗮𝗵𝗻𝗲𝗺𝗮𝗻 📖 𝗪𝗵𝘆 𝗜𝘁 𝗠𝗮𝘁𝘁𝗲𝗿𝘀: Kahneman’s exploration of cognitive biases is crucial for understanding and improving decision-making processes in investing. 𝘌𝘹𝘢𝘮𝘱𝘭𝘦: Use Kahneman’s insights to recognize and counteract emotional biases that could affect your investment choices. Have you read any of these books? What are your other top recommendations for investors? Share your thoughts and insights in the comments! ⬇️ #Investing #Finance #InvestmentBooks #InvestorEducation #FinancialLiteracy #ValueInvesting #MarketAnalysis #InvestmentStrategies #FinancialEducation #PersonalFinance

Investment zen of the day: A zen teacher once asked his disciple, "Your practice is fit for calm, but is it fit for disturbance?" The same question we have to ask ourselves about our investments: "Your portfolio is fit for calm, but is it fit for disturbance?" When the markets are going up, everybody is happy and no worries seem to be on the horizon. These are the times when we should be worried, though. How can we prepare our capital for crashes in stocks, bonds, gold, or other assets? A future-oriented investment approach helps us here. It thinks in scenarios and what-ifs, building a long-term portfolio that will do well in most if not all market phases, instead of just buying something and hoping for the best. In this article, I have shared all the details of how to do it: https://lnkd.in/eNxcTD_M If you invest like that, your portfolio *is* fit for disturbance. Enjoy the read :-) Let me know your takeaways in the comments. [PLEASE SEE THE RISK DISCLAIMER AND DISCLOSURE IN THE LINKED ARTICLE]

Educational Series: Debunking Forecasting Myths in Investment Strategy In the realm of investment, forecasting is often seen as the crystal ball that can predict market movements and secure lucrative returns. However, several myths surrounding forecasting can lead investors astray. Let's debunk these myths and highlight the importance of strategic planning over reliance on predictions. Note: This is for educational purposes only, always seek advice from your legal professionals. Myth 1: Precision is Possible One of the most pervasive myths is the belief that forecasting can predict exact market movements. In reality, the market's complexity and susceptibility to unforeseen variables make precise predictions nearly impossible. Strategic investing requires accepting uncertainty and focusing on risk management and diversification. Myth 2: More Data Equals Better Forecasts While data is crucial for informed decision-making, more data doesn't necessarily translate to better forecasts. The key is not the quantity of data but its relevance & the ability to distill actionable insights from it. Quality over quantity should be the mantra when it comes to utilizing data for investment strategies. Myth 3: Forecasting Guarantees Success Another common misconception is that accurate forecasting guarantees investment success. Even the most well-informed predictions can't account for sudden market shifts caused by political events, natural disasters, or global economic trends. Success in investing comes from adaptable strategies that can withstand market volatilities, not from reliance on forecasts alone. Myth 4: Only Experts Can Forecast Correctly While expertise in finance certainly helps, the belief that only experts can make accurate market forecasts is misleading. The truth is, even experts often get it wrong due to the market's inherent unpredictability. Investors should focus on developing a robust investment philosophy and understanding market fundamentals rather than seeking expert predictions. Myth 5: Short-term Forecasts are More Reliable Short-term market movements are highly unpredictable, often driven by speculative trading & news cycles rather than underlying economic fundamentals. Long-term investment strategies based on company performance, industry trends, & economic indicators tend to be more reliable than attempting to capitalize on short-term market forecasts. Moving Forward with Insight, Not Prediction The focus should be on creating a resilient investment strategy that does not rely solely on market forecasts. In conclusion, while forecasts can provide valuable market insights, they should not be the sole basis for investment decisions. A sound investment strategy considers a range of outcomes and remains flexible to adapt to market changes, ensuring sustainability & resilience in the face of uncertainty. By Scott Stellmon #InvestmentStrategy #MarketForecasting #FinancialPlanning #RiskManagement #Diversification #FinanceMyths

School Investment: Making a large scale school investment can be a valuable and rewarding decision, but it must also be a carefully considered process. It should include comprehensive research and analysis to evaluate multiple facets and ascertain its intrinsic worth. From financial indicators to intangible assets, each element plays a pivotal role in determining the value of an educational institution. Here’s a detailed checklist of the crucial factors and methodologies involved in the valuation process of a school investment:

A CNN article in which I am quoted on Investment Strategies for Beginners. My quotes draw on advice from my most recent investment book: "The Pure Equity Plus Plan," which offers a simple but time-tested plan for young investors to retire with a multi-million dollar nest egg. https://lnkd.in/eXKycSxm