-
The Law of Large Numbers: What Six Dice and Insurance Companies Teach Us About Reality
The world is full of uncertainty, yet we constantly make decisions based on small samples—short-term results, a few experiences, or limited data. This often leads us astray. The Law of Large Numbers (LLN) is the mathematical principle that pulls us back to reality. It tells us something simple but powerful: Small samples create noise. Large…
-
Is It an Extraordinary Result? Check the Concept of Regression to the Mean
When Results Look Too Good to Be True When a company posts extraordinary results, investors often celebrate. But before getting too excited, it’s worth asking: Is this sustainable? That’s where the concept of regression to the mean comes in. It helps us see whether a company’s performance reflects true long-term strength — or just a…
-
Is Subtraction Better Than Addition? The Inversion Model in Investing
John was an eager young investor in New York. He devoured every financial blog, subscribed to stock-picking newsletters, and kept adding more and more strategies to his portfolio—growth stocks, penny stocks, options, even crypto. But the more he added, the more complicated his portfolio became. His performance was inconsistent, and his stress levels kept rising.…
-
How Much % Is Your Wealth Growing?
A friend once told me, “I’m saving really well — I put all my money in the bank every month.” Out of curiosity, I asked him: “At what % is your money growing there?”He replied proudly, “Around 2% interest.” Then I asked him a different question:“Do you know how long it will take for your…
-
Fundamental Risk vs Price Risk: Seeing Beyond the Market Noise
Introduction: Most investors fear volatility. When the price of a stock drops 10% in a day, it feels like something is fundamentally wrong. But is it? Understanding the difference between fundamental risk and price risk is one of the most important mental shifts you can make as an investor. What Is Fundamental Risk? Fundamental risk…
-
Is Investment a Marathon or a Sprint?
When it comes to investing, one common question stands out: is it a fast-paced race to quick returns or a slow, enduring journey? The truth is, investing isn’t just a financial decision — it’s a mindset. And like all great mindsets, it thrives on clarity of purpose and discipline over time. The Sprint Mentality In…
-
What is Dirty Surplus Income?
The Hidden Line Between Accounting Reality and Economic Reality When analyzing a company’s financial health, most investors look to net income. But net income doesn’t always tell the full story. Some gains and losses sneak around the income statement — and that’s where dirty surplus income comes in. The Clean vs. Dirty Surplus Concept In…
-
Businesses – The Great, the Good and the Gruesome
When evaluating businesses, it’s essential to recognize which ones create lasting value and which ones struggle to stay afloat. Inspired by Warren Buffett’s insights, let’s break them down into three categories: The Great Business A great business has a strong competitive edge—what Buffett calls a “moat”—that protects its profits. This could be a globally trusted…
-
What Is Your Free Cash Flow Per Month?
Introduction Have you ever wondered what the financial health of your personal life looks like? In the world of business, companies use a key metric called Free Cash Flow (FCF) to measure how much money is left after covering all necessary expenses. But what if we applied this idea to personal finance? Understanding your “free…
-
What Is Your Moat?:
What Is Moat? “A truly great business must have an enduring ‘moat’ that protects excellent returns on invested capital. The dynamics of capitalism guarantee that competitors will repeatedly assault any business ‘castle’ that is earning high returns. Therefore, a formidable barrier such as a company’s being the low-cost producer (GEICO, Costco) or possessing a powerful…
-
Subscribe
Subscribed
Already have a WordPress.com account? Log in now.
SavvyGrowthPaths 