Do you have the tendency to sell your winners too early and ride losers too long? Don’t worry, most people do and this has a negative impact on your overall trading performance. It’s called the disposition effect (DE) and is related to 2 important theories that explain how we make decisions.
The first one is the prospect theory, developed by Daniel Kahneman & Amos Tversky in 1979. According to this theory, individuals take decisions based on the psychological value of gains and losses calculated from a reference point, rather than focussing on the final result. They also found that the fear of losing an amount is between 1...[more]
(Intro from the June 2014 edition of the systematic value investor newsletter)
Over the past 5 years we gathered quite a few screens and ratios. We started off with Joel Greenblatt’s Magic Formula, based on his bestseller ‘The little book that beats the market’. Greenblatt explained in very simple words that you should buy companies with above-average return on capital at below- average prices. We were the first to test this formula on European data and make the formula available globally.
Greenblatt wasn’t the only one with a working formula...[more]
South Korea has been one of the most successful economies over the last 20-30 years. Even the Asian crisis could not stop the South Korean economy from growing at around 5% p.a. since 1990.
The countries economic position compared to Japan is very healthy, Debt/GDP is only 30%, the Government currently runs a surplus and the current account is of course positive...[more]
After all, you only find out who is swimming naked when the tide goes out.
There a basically two main reasons for a total loss of capital
- companies that are cooking the books; financial statements manipulation and fraud
In most cases these risk are frequently found together.
Management's desire to put a positive spin on financial results has been around as long as corporations and investors themselves. Dishonest companies have long used these tricks to prey on unsuspecting investors, and it is unlikely that they will ever cease to do so.
It is a understatement to say that investing in companies subject to financial statement manipulation or fraud are surely not the best investments you can do...[more]