... statisticians
call a “standard deviation” (SD). This can be thought about as the degree of “scatter”
of a series of values about the average. For example, the average height of adult males
is about ... through the centuries.
Bills, on the other hand, were simply pieces of paper of a certain
face value, purchased at a discount. For example, the Bank of Eng...
... dividends for each year to the present, then add them all up. But
with a few mathematical tricks, this nut is easily cracked.
A Stream of Future Dividends, Forever and Ever, Amen
To paraphrase the famous ... accurately predicted by the
Gordon Equation. As I’ve already said, these are essentially the laws
of gravity and planetary motion of the financial markets. But it se...
... was the result of a massive
collaborative effort to collect and analyze stock and bond prices. As
researchers began to examine the aggregate performance of stocks
and bonds, it was only natural ... high-octane
Manhattan Fund.
Unfortunately for Tsai, just at that point, he was struck with a fatal
case of chimpanzee syndrome. The years 1966–1967 were mediocre
for Manhattan a...
... size of the fund, the size of the
company, and the total amount transacted. As a first approximation,
assume that it is equal to the spread.
The four layers of mutual fund costs:
• Expense Ratio
• ... your
100 The Four Pillars of Investing
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made possible the storage and analysis of a mass and quality of stock
data that C...
... practices the lack of historical knowledge is the one that causes
the most damage. Consider, for example, the principals of Long Term
Capital Management, whose ignorance of the vagaries of financial ... time. For this generation, the horses are
already out of the barn, and it may be another 30 years the typical
Let’s get a bit of nomenclature out of the wa...
... Most
American financial authorities realized that this was an awful idea.
Unfortunately, Benjamin Strong, the chairman of the Federal Reserve
Bank, and Montagu Norman, the Governor of the Bank of ... amounts of capital now available.
There was even a fashionable new technology involved: the laws of
probability. Fermat and Pascal had recently invented this branch of
mat...
... than
all of them?
On top of that, there are tens of thousands of professional investors
using the kind of software, hardware, data, technical support, and
underlying research that you and I can ... next major error that investors make is the assumption that the
immediate past is predictive of the long-term future. Take a look at the
data from the table at the begin...
... industry and resulted in the passage of the Securities Acts
of 1 933 and 1 934 , and the Glass-Steagall Act, which still shape the finan-
cial industry today. But for decades before this, Charlie Merrill ... were
buoyantthat
year.Then,asnow, tech stocks wereall the rageand trad-
ing volume was high,atleast bythe standardsof the day. Brokersat
other firms,
all ofwhomworked on...
... funds carry
a sales load of up to 6%, and another 30 % carry a 12b-1 annual fee of
up to 1% per year for marketing. The most notorious of these is the
American Skandia ASAF Bernstein (no relation!) ... 0.80% expense gap is an insurmountable
advantage—even the Almighty himself is incapable of assembling a
portfolio of GMNAs capable of beating the GNMA market retu...
... has a $3, 000 minimum.
284 The Four Pillars of Investing
Table 14-1. “Taxable Ted’s” Value Averaging Path (for $500,000 Stock Allocation)
Total Stock Tax-Managed Tax-Managed
Market Index Small ... in a taxable account) or for a house down payment, as long as
enough of the bonds are in a taxable account.
Although the central tenet of asset allocation is to consider...