Starting from the beginning
Nothing here assumes you own anything or intend to buy anything soon. These are the ideas the rest of the library takes for granted, chosen because each one changes how you read the next thing you come across, on this site or anywhere else.
Read these in this order
9 frameworks. Each one ends in a number rather than an opinion.
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01What diversification does, and does not
Diversification removes the risk specific to any one holding and does nothing about the risk shared by all of them, which is why a portfolio of thirty companies in one country or six apartments in one city is far less diversified than the number of lines suggests.
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02Net rental yield
Net rental yield is annual rent minus every running cost, divided by the purchase price plus every acquisition cost, and it is typically two to three percentage points lower than the gross yield a listing advertises.
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03Fee drag
Fee drag is the compounding cost of every percentage charged against a portfolio each year, and because it is deducted from the base that would otherwise have compounded, a one percent annual fee costs far more than one percent of the final result.
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04Inflation and real returns
A real return is what is left after inflation, and because inflation compounds silently against every asset at once, a portfolio that looks like it is growing in currency terms can be losing purchasing power for years without a single statement showing a loss.
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05What bonds are for
Bonds are held to provide a predictable payment stream and to behave differently from equities when equities fall, not to produce high returns, which means the right question about a bond holding is what job it does in the portfolio rather than what yield it shows.
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06The behaviour gap
The behaviour gap is the difference between the return a fund reported and the return its average investor actually earned, and it exists because money tends to arrive after good performance and leave after bad.
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07Sunk cost and the decision to sell
The price paid for an asset has no bearing on whether to keep it, because that money is spent either way, and the only question that matters is whether the asset is the best use of the capital it currently ties up.
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08Reverse the assumption
Reversing the assumption means taking the price being asked, holding your required return fixed, and solving for the growth rate the price implies, which converts a forecast you were asked to accept into a claim about the future that can be checked against history.
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09An investment policy statement
An investment policy statement is one page written while nothing is going wrong, setting out what you own, why, and the conditions under which you will change it, and its whole function is to be consulted at the moment its author least wants to read it.
Run your own numbers
Nothing is stored and nothing is sent anywhere. The arithmetic runs in your browser.
Gross yield is what the brochure shows you. This is what reaches your account.
Vanguard tested it. Investing immediately won roughly two thirds of the time.
Terms you will meet
Each is one sentence, then the trap it hides.
Not quite you?
Investments Playbook publishes educational research and general information. Nothing on this site is personal investment advice, a solicitation, or a recommendation to buy or sell any asset. Property and securities can fall in value. Past performance does not predict future returns. Figures shown are indicative and may be delayed. Always take regulated professional advice before acting.