Muscular Investing

Brian Livingston
About the author: is the author of Muscular Portfolios (2018), which reveals the 21st century's best-performing long-term trading strategies, and editor of the free Muscular Portfolios Newsletter. He is also the coauthor of 11 Windows Secrets books (1991-2007). He has been assistant IT manager of UBS Securities, a consultant to Morgan Guaranty Trust (now JPMorgan Chase), and technology adviser to Lazard Ltd., all in New York City. His columns appear in the Muscular Investing blog most Tuesday and Thursday mornings. Learn More

Latest Posts

Muscular Investing

Even When Your Funds Are Gone, the Game Might Not Be Over

by Brian Livingston

Foreign-exchange dealers offer enormous leverage to customers, and leverage can lead to enormous losses — greater than your entire balance. • Experience with global currency-trading brokers shows that they value the profits they earn from traders so much that even some busted account holders can be forgiven their debts, if it will keep the traders paying commissions and fees. Figure 1. Leverage can quickly put your account balance underwater, but even that may not stop traders at certain foreign-exchange brokers. Photo by Zwiebackesser/Shutterstock. • Read More 

Muscular Investing

Currency Trading is a Great Way to Lose Money

by Brian Livingston

Studies show that although 84% of currency traders think they can make profits, only 30% actually do. What can we learn from this fact? • People are vastly overconfident in their ability to wring gains from what seems like a simple game. In currency-dealer records, traders win more than 50% of their bets, but their losing trades cost almost double what the winning ones make. Figure 1. The idea of making profits from currency trading can fill us with wild expectations of riches, but it ain’t necessarily so. Photo by Roman Samborskyi/Shutterstock. • Tens Read More 

Muscular Investing

How to Invest Without Suffering from Behavioral Biases

by Brian Livingston

We make poor decisions when presented with financial data, because the subsconscious mind is in control of our interpretation of the facts. • Simply saying, ‘I will not be affected by my subconscious mind,’ is pointless. That very statement could well be another head-fake by parts of your brain that are not apparent. Fortunately, we now have tools to make better choices. Figure 1. Our subconscious mind is constantly making us see things that are not there, all the while reassuring us that the actions it directs are the most rational and logical steps we can take. Photo by Read More 

Muscular Investing

When to Use a Computer and When to Use Your Brain

by Brian Livingston

It’s well-established that computers outperform the best human players in chess, poker, Go, and other skills. The same is true in the game of investing. • We can use this fact to boost our long-term performance. Simple computer formulas outdo financial experts. Their minds and ours are clouded with ‘behavioral biases’ that economists have proved are baked into our human decision-making processes. • Part 3 of a series. Parts 1 and 2 appeared on May 7 and 9, 2019. Photo by VG Stock Studio/Shutterstock. • In Parts 1 and 2 of this series, we’ve seen Read More 

Muscular Investing

Paper Trading Is Not the Same as Serious Money Trading

by Brian Livingston

To learn how to invest, people often try ‘paper trading.’ This technique means buying and selling only in theory, without any actual money involved. • It may not be that simple. Research shows that people take on MORE RISK after a paper loss, but do EXACTLY THE OPPOSITE when a loss is realized with their own dollars. That leads to different results. Figure 1. Paper trading seems to encourage greater risk-taking than serious money trading, especially when the investor has recently experienced a losing trade. Photo by Pressmaster/Shutterstock. • Part 2 of a series Read More 

Muscular Investing

To Make More Profit in the Market, It Helps If You're Brain-Damaged

by Brian Livingston

Patients with damage in the part of the brain that monitors risk make more money in a simple investing game than normal people. We can learn from this. • Everything about a modern stock market involves random events and the chance of loss. How we deal with that can determine how profitable our investing turns out. Being ‘ordinary’ sometimes doesn’t make as much profit as being a little contrary. Figure 1. Our unconscious behaviors hurt our investment performance, but a little sideways thinking can improve our gains. Photo by Sunny Studio/Shutterstock Read More 

Muscular Investing

Broad-Based Investment Pools Arise for Affordable Housing

by Brian Livingston

The slow rate of housing development in many cities is causing a crisis of affordability. Solving the problem can be profitable. • With the release of  regulations by the US Treasury only days ago, organizations are now pooling small investors’ funds for development within so-called Opportunity Zones. Knowing how these pools work can help you diversify your portfolio with physical real estate. Figure 1. Many cities have a shortage of affordable housing, making uninhabited (and currently uninhabitable) units ripe for moderate-income residential Read More 

Muscular Investing

New Opportunity Zone Regulations Make Real Estate More Profitable

by Brian Livingston

For those who want to deal with physical property, the profit potential of real estate is clear. Now it can be an even better investment. • Congress authorized special ‘Opportunity Zones’ in 2017, but the necessary federal regulations weren’t released until just last week. The Treasury’s announcement is the starting gun for a 10-year period in which you pay NO CAPITAL-GAINS TAX on investments in these zones. Figure 1. Profitable real-estate investments have just become a lot MORE profitable, thanks to tax-free gains that Congress has authorized for the Read More 

Muscular Investing

A Revolutionary New Way to Invest in Real Estate

by Brian Livingston

Index funds have made real-estate investment trusts (REITs) accessible to investors for years. Now there’s something new in physical real estate. • As the population ages, more and more people will be looking for housing developments that offer a little extra in the way of support. One project is having an open house of such a development next month. There are certain to be many more. Figure 1. Luna Azul in Phoenix, Arizona (above), is designed as a “pocket neighborhood,” a small cluster of residences arranged around a shared, park-like commons and a central Read More 

Muscular Investing

Avoid Behavioral Biases and Make More Profits

by Brian Livingston

Our built-in behaviors, which are unconscious, make us choose investments that will lag. The key is to do what we can to defeat these tendencies. • The more research we do, the more we convince ourselves of our rightness, and therefore the more overconfident (and wrong) we become. Fortunately, there are easy ways we can let the market — rather than our opinions — tell us what to buy and sell. Figure 1. As investors, we can leave behavioral biases aside and use sound principles to guide us to long-term outperformance. • Part 4 of a Read More 

Muscular Investing

The Best Strategy Becomes the Worst, and the Worst the Best

by Brian Livingston

Investing strategies have short-term momentum (the past 3 to 12 months predict the next month) but long-term reversion (the past 3 years deceive you). • Institutions that hire outside money managers routinely fire any analyst who underperforms a benchmark for 3 years. Some fire analysts after just 1 or 2 years. You’ll be shocked to see how much you could earn if you did exactly the opposite. Figure 1. Don’t fall into the trap of thinking that the past 3 years’ worth of performance predicts good returns in the following 3 years. • Part Read More 

Muscular Investing

Ignore the Last 3 Years; They'll Just Deceive You

by Brian Livingston

It isn’t only individuals who exhibit ‘short-termism.’ Highly capitalized institutions suffer from the same bias. Don’t let it harm YOUR performance. • As humans, we share a strange compulsion about the last few years of price action. The SEC compels mutual funds to publish their returns over meaninglessly short periods, such as 1, 3, and 5 years. Unfortunately, what’s gone up has a tendency to go down. Figure 1. What’s gone up in the past three years tends to revert to subpar performance, not continue its past performance. • Part 2 Read More 

Muscular Investing

Buying a New Fund? Don't Even THINK About It.

by Brian Livingston

Perhaps you’re tired of the fact that one fund you hold is underperforming the market. Should you switch now or forever hold your piece of the pie? • Don’t make a move till you’ve read this article. Most of the time, the securities we sell outperform the ones we buy as replacements. Don’t let your mind play tricks on you. Figure 1. What do we perceive when we hear the market calling? Probably a wrong number. • Tens of millions of households hold 401(k) and similar accounts that prohibit buying individual stocks or trading more than once or twice per month. Never Read More 

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