General Flashcards
What is the dividend yield for S&P 500?
On 2/Mar/24
~1.5%
What yield can you get on high grade corporate bonds?
On 2/Mar/24
5.05%
https://ycharts.com/indicators/moodys_seasoned_aaa_corporate_bond_yield
What is Santayana’s quote about history?
Those who do not remember the past are condemned to repeat it
What is the benefit of “dollar cost averaging”?
By investing the same amount every month, you buy lots of shares when prices are cheap, and relatively fewer shares when prices are high
What are the two types of investor? Per Ben Graham
Defensive
Enterprising
What examples show that it’s not a good idea to pick stocks based on growing industries?
Air-transport in the 1940-50s e.g. Aeronautical Securities did not perform well
Also computers, with the exception of IBM
Which famous person lost a fortune in the South Sea Bubble?
- Sir Isaac Newton
- Lost 20,000 gbp
- For the rest of his life he forbade anyone from saying “South Sea” in his presence
- He also said that he: “could calculate the motions of the heavenly bodies but not the madness of the people”
How does Graham define investment?
An investment operation is one which on thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.
What two things must be true for an investor to beat the average?
- Follows a policy that is sound and promising
- Not popular on Wall Street
What is the historical return of the S&P 500?
The index has returned a historic annualized average return of around 10.26% since its 1957 inception through the end of 2023.
Inflation is one of the major problems for an investor hoping to recreate that 10.13% average return regularly. Adjusted for inflation, the historical average annual return is only around 6.37%. There is an additional problem posed by the question of whether that inflation-adjusted average is accurate since the adjustment is made using the inflation figures from the Consumer Price Index (CPI), the index that some analysts believe vastly understates the true inflation rate.
What was the US inflation rate for the last 3 years?
2021 ….. 4.7%
2022 ….. 8%
2023 ….. 3.40%
What is the link between inflation and earnings / stock prices?
There is none!
What did JP Morgan say when asked what markets would do?
They will fluctuate
Does it make sense to go 100% into bonds (if stock prices are high)?
As some hedge against inflation, you should have some of your portfolio in stocks (less vulnerable than bonds to inflation althought they are not a true hedge)
What is the current corporate tax rate?
The worldwide average statutory corporate income tax rate, measured across 180 jurisdictions, is 23.37 percent. … USA is 21% … Ireland 12.5%
