Muscular Investing

April 2019

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 

Muscular Investing

What's Normal About the Stock Market? Not Much.

by Brian Livingston

One of the most powerful predictive forces in the natural world is the bell curve or ‘normal distribution.’ But don’t make any trades based on it! • An inexpensive device demonstrates the curve’s age-old principle — as well as Fibonacci numbers, a favorite of technical analysts — although you should be careful about any assumptions you might make. Figure 1. The Galton Board is a $39.95 gizmo that packs a lot of mathematical theory. Photo by Four Pines Publishing. In my Mar. 7, 2019, column, titled “How Do You Know Your Strategy Will Work in the Read More