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🦉 Succeed by Not Failing
Discover how Jack Bogle's Vanguard changed investing by not screwing up. Find out why avoiding mistakes beats being a genius. Ready to win by not losing?
Jeff
September 22, 2024
In partnership with
Hi there… Today, we'll delve into why avoiding mistakes might be your best investment strategy, explore why millionaires are choosing to rent over buy, examine how gut feelings influence finances, and take a closer look at Broadcom's competitive edge.
— Jeff
Wisdom of the Day
Good investing is not necessarily about making good decisions. It's about consistently not screwing up.
Jack Bogle's Vanguard emerged as the tortoise that outpaced the hares. Bogle's revolutionary idea wasn't about being the smartest in the room; it was about not being the dumbest.
Think of investing like a cross-country road trip. While everyone else was racing down backroads looking for shortcuts, Bogle set the cruise control on the highway and avoided unnecessary pit stops. His creation, the index fund, wasn't designed to outperform the market; it was designed to be the market.
This philosophy of consistent non-failure paid off spectacularly. By 2018, Vanguard had become the world's largest provider of mutual funds, with over $5 trillion in assets under management. All this success wasn't built on brilliant decisions or perfectly timed market moves. It was built on the power of consistently not screwing up.
Remember, in investing, as in life, you don't need to be a genius to be successful. You just need to avoid being stupid. Sometimes, the best way to win the race is to focus on not losing it. — Jeff
The Inverted Lens
Invert, always invert: Turn a situation or problem upside down. Look at it backwards. What happens if all our plans go wrong? Where don't we want to go, and how do you get there?
Why Millionaires Are Saying No to Homeownership
The trend of affluent individuals opting to rent rather than purchase homes signals a significant shift in the U.S. housing market, challenging traditional notions of wealth and homeownership. This phenomenon is driven by a confluence of factors, including a scarcity of desirable properties, changing economic calculus due to elevated home prices and mortgage rates, and a preference for liquidity and investment flexibility.
The Federal Reserve's interest rate hikes have made mortgages less attractive, even for high-net-worth individuals. Simultaneously, the allure of maintaining liquidity for other investment opportunities has increased. The luxury rental market has evolved to cater to this demographic, offering high-end amenities that rival owned properties.
This trend reflects a broader reassessment of personal and financial priorities, with flexibility and mobility gaining prominence over conventional asset ownership. However, it's crucial to consider the long-term implications, including the lack of equity-building and exposure to rent increases.
The future of homeownership may depend on evolving economic conditions and shifting attitudes, especially among younger millionaires. This phenomenon underscores the importance of critically evaluating assumptions about wealth and investment in an ever-changing market landscape.
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MULTIDISCIPLINARY WISDOM
The affect heuristic. This mental shortcut can lead you to make investment decisions based on gut feelings rather than cold, hard facts.
Think of it like judging a book by its cover. You might be drawn to a stock because the company has a charismatic CEO or a compelling story, leading you to underestimate its risks and overestimate its potential returns. It's like falling for a smooth-talking salesman – sometimes you're right, but often you're way off base.
This emotional influence can lead to some pretty quirky behavior. You might find yourself overloading on stocks from your home country just because they feel familiar, or jumping on the bandwagon of the latest hot sector without really understanding what you're buying.
So, how do you guard against this mental trap? Start by recognizing that your emotions play a role in your investment decisions. Then, try implementing a systematic, rules-based strategy. It's like giving yourself a map before emotions cloud your judgment. Remember, in investing, as in life, your gut feelings aren't your enemy, but they shouldn't be your only guide either.
THE MOAT
Broadcom Inc. stands as a semiconductor and infrastructure software powerhouse, leveraging its diversified portfolio to create a formidable economic moat. With Q3 2024 revenue reaching $13.1 billion, a 47% year-over-year increase, Broadcom demonstrates robust growth across multiple segments, particularly in AI-related technologies.
The company's competitive advantage is reinforced by substantial R&D investments ($3.8 billion in fiscal 2023) and strategic acquisitions, notably the $69 billion VMware deal. This positions Broadcom at the forefront of AI chip design and enterprise software solutions, with projected AI revenue of $12 billion for fiscal 2024.
However, challenges persist, including industry cyclicality, regulatory scrutiny, and intense competition in the rapidly evolving AI and cloud computing sectors. The VMware acquisition also introduces integration risks and increases debt load.
Despite trading at a slight premium to estimated intrinsic value, Broadcom's strong competitive position and growth potential in high-growth sectors like AI and cloud computing make it a compelling consideration for long-term investors. Management's track record of balancing organic growth with strategic acquisitions aligns well with industry trends.
While risks exist, Broadcom's fundamental strengths, technological prowess, and strategic vision position it well to navigate the evolving technology landscape, offering investors exposure to key drivers of digital transformation.
Always Invert
How can Broadcom strengthen its market position and drive innovation?
Ask this:
How could Broadcom undermine itself and lose its competitive edge
1. Neglecting innovation and technological advancement.
2. Ignoring customer needs and market trends.
3. Overextending with risky acquisitions.
4. What else?
Ask Yourself:
Is Broadcom failing in innovation, disregarding market needs, or overextending through risky acquisitions?
REC
📚 Book: The Bogleheads' Guide to Investing
Dive into the wisdom of John C. Bogle's investment philosophy. It's like getting a crash course in common-sense investing from the founder of Vanguard himself. Learn how to craft a simple yet effective investment strategy that's stood the test of time.
📰 Read: Real estate vs Stock market
Explore the age-old debate of real estate versus stocks. It's a reminder that sometimes the conventional wisdom isn't so wise after all. Consider how Charlie Munger's experience might inform your own asset allocation strategy.
🎥 Video: Why Jack Bogle Doesn't Like ETFs
Watch Bogle explain his reservations about ETFs. It's like getting investment advice straight from the horse's mouth. Gain insights into the potential pitfalls of certain investment vehicles and the importance of long-term thinking.
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MY WATCHLIST
$AMZN, $GOOGL, $CELH, $DIS, $CHWY, $CROX, $ULTA
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