In this episode, we discuss how we use the Kelly criterion in our own investing strategy.Investing is not a one-time event, and markets are not always efficient, as claimed by Harry Markowitz and his followers. Investing is instead a series of repeated similar bets, and markets are frequently inefficient.We can regularly find stock markets and sectors which have become cheaper than their long-run mean valuations. Given the above, why wouldn’t you look to place bets on high-probability events rather than risk losing your capital in expensive markets?Kelly developed a formula that showed how to invest fractionally and understand your edge.Kelly investing should lead you to the question: ‘What is your informational edge?’In this episode Stephen tells us about one informational edge he uses - the CAPE ratio - and how it can be yours too, given its high correlation with expected returns.We discuss why understanding the Kelly criterion, capital growth theory, and position sizing are crucial to maximising your long term wealth. There will always be great opportunities in the future, so you must make sure you are around to capitalise on them by waiting for the fat pitch. Some of the key points we discuss in this episode include:-What is the Kelly Criterion?-A proven system for maximising your long-term wealth -THIS is what your information edge can be -It’s a big world out there, and there are many markets to choose from. Why limit yourself?-When the odds are in your favour, bet more (and when they’re not, bet less...or not at all). Download a free chapter of our book:https://www.lowrateshighreturns.com/podcastThese are the books we mentioned in the episode. Check them out!Fooled by Randomness by Nassim Taleb:https://www.goodreads.com/book/show/38315.Fooled_by_RandomnessThe Warren Buffett Way by Robert G. Hagstromhttps://www.goodreads.com/book/show/18613679-the-warren-buffett-way-workbook

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This episode does exactly what is says on the tin!We tell you how and where we’re investing our money today...and why!We discuss the benefits of holding some cash, why patience is critical, and how to maximise your long-term wealth while thinking across different timeframes. Some of the key points we discuss in this episode include:- Why everyone’s portfolio is (and should be) different- How we’re investing our money today- What are we investing in today?- THIS is why we think about money and investing in 3 different timeframes - Total money management: our unique approach to managing money for total financial independenceThanks for listening!Download a free chapter from our book’ Low Rates, High Returns’https://www.lowrateshighreturns.com/podcastPete Wargent https://www.petewargent.com/https://www.linkedin.com/in/pete-wargent-37228322/Stephen Moriartyhttps://twitter.com/SGM63

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The Kelly Criterion holds that we should look to buy companies when they are cheap or undervalued, to maximize our geometric returns. But remember the risk hierarchy: investing in individual companies can entail a risk of permanent loss of capital.Instead of looking for the next big thing, when investing in companies we look instead for market mispricing: finding opportunities to buy a dollar for 50 cents. The Lindy Principle tells us that when some companies and brands have been around for a very long time, then we should expect them to remain around for a very long time into the future - a key quality to look out for in potential company investments. We discuss how to find established, profitable, systemic companies, which will throw off powerful dividend or income streams for decades to come. OK, everybody look away now: Steve also tells us why tobacco has been one of the best performing sectors over the decades. We touch on the pros and cons of ethical investing (ESG) from a returns perspective, and how fund managers are now shifting their thinking towards investing in sustainable companies.Some of the key points we covered in this episode include:- What type of companies should you invest in?- How to avoid losing money in individual stocks- Looking for established, systemic companies- Which sectors to look for and which to avoid- The importance of the dividend component of your returnsThanks for listening!Download a free chapter from our book ’ Low Rates, High Returns’https://www.lowrateshighreturns.com/podcastPete Wargent https://www.petewargent.com/https://www.linkedin.com/in/pete-wargent-37228322/Stephen Moriartyhttps://twitter.com/SGM63

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Rebalancing is a magical tool, and a critical part of managing your portfolio. As we talked about in Episode 1, investing is not a one-time event, but rather a series of repeated similar bets. Regular rebalancing is a tool used by investment professionals to manage risk, and is proven to help you generate higher returns over time. Using realistic numbers and even some personal examples, we shed some light on the concepts of rebalancing your portfolio.Rebalancing effectively forces you to take money off at the highs and feed it back in at the lows.In summary, the key points covered in this episode are:- What is rebalancing?- Why do the professionals rebalance?- Forcing yourself to take money off at the highs… and feed it back in at the lows- How rebalancing manages your risk more effectively- THIS is why rebalancing improves your returns. Thanks for listening!Download a free chapter from our book’ Low Rates, High Returns’https://www.lowrateshighreturns.com/podcastPete Wargent https://www.petewargent.com/https://www.linkedin.com/in/pete-wargent-37228322/Stephen Moriartyhttps://twitter.com/SGM63

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We’ve all heard the phrase ‘don’t put all of your eggs in one basket’.In this episode we discuss several of the ways in which you can diversify to minimize risk, without adversely affecting your returns. We talk about the difference between investing in individual companies and ETFs, how to screen for opportunities, and we dive deeper into the key elements of investing in countries, sectors, and styles. Some of the key points covered in this episode are:- Rule #1: Don’t Lose Money!- Black swan events and why you mustn’t have all of your eggs in one basket- Diversifying across positions.- Diversified products (ETFs and index funds)- Diversifying across countries, sectors, and styles- Diversifying over time: averaging down into value investments Thanks for listening!Download a free chapter from our book ’Low Rates, High Returns’https://www.lowrateshighreturns.com/podcastPete Wargent https://www.petewargent.com/https://www.linkedin.com/in/pete-wargent-37228322/Stephen Moriartyhttps://twitter.com/SGM63

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We think about money across 3 timeframes, and in this episode we show you how you can too.If you want to be truly financially independent, of course you need to grow and compound your net worth.But also need to have liquid assets and cashflow to pay for your living and lifestyle costs. Some of the key points we covered in this episode include:- Why we think about money and investing across 3 timeframes- Well 1: Living Costs (0-12 months) - how you can manage your short-term money profitably for cashflow - Well 2: Lifestyle (2-5 years) - our proven ETF strategy using capital growth theory- Well 3: Long term and legacy (lifetime investments) -potentially including real estate, and large, systemic companies for long term dividend income and compound growthThanks for listening!Download a free chapter from our book ’ Low Rates, High Returns’https://www.lowrateshighreturns.com/podcastPete Wargent https://www.petewargent.com/https://www.linkedin.com/in/pete-wargent-37228322/Stephen Moriartyhttps://twitter.com/SGM63

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We already know we aren’t all rational when it comes to money and investing.Moreover, we all have different underlying motivations, goals, strengths, and weaknesses when it comes to how we think and make decisions about money. How can we improve our results?By knowing thyself, and by developing a systematic approach which plays to your strengths and negates your weaknesses! Some of the key points we cover in this episode include:- What are the 9 Personality Types? - How we use the Enneagram Assessment to benefit you- Understanding your unique strengths and weaknesses to make better decisions- How your personality type impacts your decision making- How to get your own Free Investment MapThanks for listening!Download a free chapter from our book ’ Low Rates, High Returns’https://www.lowrateshighreturns.com/podcastPete Wargent https://www.petewargent.com/https://www.linkedin.com/in/pete-wargent-37228322/Stephen Moriartyhttps://twitter.com/SGM63

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You don’t have to be heavily invested in the market at all times, whatever the finance industry might tell you (or sell you!).In fact, it makes logical sense to manage your exposure through the cycle.To maximise your geometric returns, it’s critical to avoid large drawdown in your wealth. Some of the key points we cover in this episode include:- What is asset allocation and how should we approach it?- Why is asset allocation key to your success?- How to address your macro allocation - THIS is when you should increase/decrease your exposure to stocks- How to manage your micro allocationThanks for listening!Download a free chapter from our book ’ Low Rates, High Returns’https://www.lowrateshighreturns.com/podcastPete Wargent https://www.petewargent.com/https://www.linkedin.com/in/pete-wargent-37228322/Stephen Moriartyhttps://twitter.com/SGM63

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If Rule #1 of investing is ‘don’t lose money’ then it makes sense to understand which investments entail a risk of the permanent loss of capital. Some of the key points we cover in this episode include:-An explanation of our ‘Risk Hierarchy’ principle’?-The capitalist distribution: why most companies fail to deliver the goods -Why it’s so hard to pick stocks consistently well-How and why you can use index funds and ETFs-If you must invest in companies...do THIS! Thanks for listening!Download a free chapter from our book ’Low Rates, High Returns’https://www.lowrateshighreturns.com/podcastPete Wargent https://www.petewargent.com/https://www.linkedin.com/in/pete-wargent-37228322/Stephen Moriartyhttps://twitter.com/SGM63

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In this episode we discuss the problems and challenges with the ‘buy & hold’ approach to investing. Put simply, it doesn’t work all the time.Markets aren’t always efficient, and we can instead use valuation tools to manage exposure, and position ourselves to outperform through full market cycles. We get stuck into some practical information on how to use the CAPE (cyclically adjusted price-to-earnings) ratio as one way to guide your path.We present analogies, statistics, and personal experiences of investing through various market cycles.In summary, the key points we covered in this episode are:- Stocks don’t always go up! - The problem with buy and hold: it doesn’t work all the time- The problem with ‘average’ returns- This is why the geometric return is the key to maximizing your long-term wealth- Why you must buy low and sell high to optimise your actual wealthBooks mentioned: Mastering the Market Cycle by Howard Markshttps://www.goodreads.com/book/show/37570460-mastering-the-market-cycleProbable Outcomes by Ed Easterling https://www.goodreads.com/en/book/show/10314811-probable-outcomesThanks for listening!Download a free chapter from our book ’ Low Rates, High Returns’https://www.lowrateshighreturns.com/podcastFind out more about our coaching program:https://gonextlevelwealth.com.au/Pete Wargent https://www.petewargent.com/https://www.linkedin.com/in/pete-wargent-37228322/Stephen Moriartyhttps://twitter.com/SGM63

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