Let’s say you have found the perfect stock. You’ve done your homework and know everything fundamentally about the company there is to know. It’s a rock-solid business with a few near-term and potential-long term catalysts that could drive the price much higher than it is today. Based on intrinsic value you estimate now appears to be a good time to buy, so you take the plunge and buy a few shares. Here is where it gets tricky...
Even with all the homework you’ve done, NOTHING in the stock market is certain. As such, I’d like to walk through a few common scenarios I have experienced and seen myself. [Read More...]
I love the idea of using mathematics to analyze different stock picks. It’s why I started this blog and a technique I believe can be extremely useful when looking at stock portfolios. The logic behind using mathematics in equity analysis is simple: Stocks by nature are probabilistic and mathematics gives us the opportunity to make sense of the uncertainty.
In order effectively apply statistics to stocks you first need to understand the underlying up / down probabilities of stocks themselves. This is somewhat less mathematical but a critical foundation to successful Smart Money Math. To determine the likelihood of stocks going up or down in a given period of time there are two unique schools of thought. [Read More...]
Are you afraid of losing money in your investment portfolio during the next market downturn? You’re not alone. Our human brains are wired to worry more about losing money than gaining an equivalent value due to something psychologists call loss aversion. Perhaps this is why so many people talk about different strategies you should employ in your investment portfolio before the next market downturn. This feeds our desire to protect what we have now.
I’ll admit that when I started investing years ago, I had this same tendency. I would look at my portfolio daily to check and see if things had gone down. I would scan the latest headlines looking for signs of an impending market crash. Of course, if you look hard enough finding these types of articles isn’t that hard.[Read More...]
Now that I have officially launched the Smart Money Math portfolio, it’s time to get down to the nuts and bolts of how it (and this blog) will work! While things may change over the course of time, my initial construction will consist of the following setup described below. [Read More...]