We have prepared a collection of videos that describe our approach to stocks, bonds and investing in general.
Value Investing. What is value investing, and why does it matter? Value investing is an approach to investing that emphasizes current conditions. Past average returns are largely unimportant. What matters most to long-term investment results is the price you pay for the investment today.
Fair Value. Since the price we pay today is the most important input to investing results, how do we know whether the price is too high or too low? We have to first create an estimate for future earnings, and a rate of return that we expect. It is then a matter of simple algebra to compute a fair price for an asset.
The P/E Ratio, or Multiple. A value investor compares the price of stocks to an estimate of future earnings. If that price is high by historical standards, the results are almost always bad. If the price is fair, or even low, results tend to turn out good.
Bonds = Certainty. Many investors and advisors misunderstand the role of bonds in a portfolio. Having a habit of checking stock prices daily, they also obsess over bond prices. But bonds pay a stated amount of interest and a stated amount at maturity. They provide portfolios with a refreshing dose of certainty, allowing investors to ignore the daily and monthly price swings.
Safe and Tax-Free. The tax-free attraction is obvious. It’s not what you make, it’s what you keep. But none of this matters if the bond defaults. Credit quality is the key to owning bonds. We have almost 30 years’ experience with credit quality, and we know how to minimize credit risk.