This Week’s Takeaways:
- The homebuilding industry has struggled since 2022 and Berkshire Hathaway just made a big bet perhaps signaling the beginning of a turnaround in industry fortunes and that scale in this space matters more than anything.
- Inflation is best protected against long-term through equities, but a small allocation to commodities and TIPS in the short-term can help protect in the current environment.
- Fewer than 4% of stocks in the last 100 years accounted for all the market’s gains. Diversification is essential, as a concentrated stock portfolio is a lottery ticket based on this math.
- Market highs are predictive of more market highs, as 99% of the time a new market high had been hit within a year and the best days to invest historically have been at market highs.
- Plus, my latest book recommendation and this week’s Boston Corner.
Berkshire seems like it’s making another value-driven investment bet. The homebuilding industry has struggled since the Pandemic boom ended in 2022 and profit margins are compressing. Scale matters in an environment like this and Berkshire possesses it now with this latest move.
A core-satellite approach to hedging inflation by Vanguard
Inflation risk has reentered the investment conversation. Long-term purchasing power is best maintained through growth assets, particularly stocks, but in the short-term assets such as commodities and TIPS can help as well. A core-satellite approach involving modest allocations to those latter two asset classes can raise a portfolio’s inflation beta while preserving diversification and long‑term return efficiency.
A Century of Stock Market Winners—and Why Most Stocks Failed to Deliver by Wealth Management
A 100-year study of stock market returns showed that the median return for an individual stock was -6.9%, only 48% generated any real return, and all the wealth creation was created by just 3.72% of firms. The main takeaway is that diversification isn’t just prudent, but necessary. If fewer than 4% of stocks account for all the market’s net gains, a concentrated stock portfolio is essentially a lottery ticket. Owning the entire market is the most reliable way to capture the few enormous winners that are nearly impossible to identify in advance.
All-time highs have been great times to invest in the stock market 📈 by TKer
History shows that when market are at all-time highs investors don’t need to be nervous about a stretch of weaker returns to follow. 99% of the time within one year another all-time high had been hit and investing in the S&P 500 at all-time highs has led to better performance than investing on all other days.
You Won the Battle on Investment Fees. You’re Losing the War Against Taxes. by the Wall Street Journal
A new study shows that federal taxes eat up more than a third of investors’ returns over time, and that’s assuming you owned a tax-efficient index fund. Investors need to look beyond stated returns and comparing them to a benchmark and dig into their portfolio’s tax-efficiency. I shared some ideas here.
Social Security: Two Underestimated Factors Before You Automatically Delay Until Age 70 by Savant Wealth
Don’t automatically delay Social Security, but instead understand that the answer to what’s your best approach depends on your health and life expectancy, the strength and flexibility of your investment portfolio, your tax situation, your income needs, and your honest assessment of how much political risk you’re comfortable absorbing from a program that faces real structural challenges in the years ahead.
Book Recommendation
No More Tears: The Dark Secrets of Johnson & Johnson by Gardiner Harris
An explosive, deeply reported exposé of Johnson & Johnson, one of America’s oldest and most trusted pharmaceutical companies—from an award-winning investigative journalist.
Boston Corner
Logan’s Framingham remote terminal opens by Axios
