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Concentrated vs Diversified Portfolio: What Works

The concentrated vs diversified portfolio debate has been going on for decades, and both sides are absolutely sure they are right. On one side, you have index fund advocates telling you to buy 500 stocks and go for a walk. On the other, you have legendary investors who built their fortunes by putting enormous amounts of money into a handful of ideas. Both camps have produced winners. Both have produced spectacular blowups. So which approach actually works? The answer, as with most things in investing, depends on what you actually know – and more importantly, what you are honest enough to admit you do not know.

Why 90% of Active Fund Managers Underperform

Most active fund managers fail to beat the market. Not because they are dumb. Not because they lack fancy degrees or Bloomberg terminals or 80-hour work weeks. They fail because the math is stacked against them, the incentives are misaligned, and the data has been telling us this for decades while most investors refuse to listen. If you are paying someone 1-2% annually to pick stocks for you, you are almost certainly paying for underperformance with a nice suit.

How to Calculate Intrinsic Value of Any Stock

Intrinsic value is the single most important number in investing, and almost nobody calculates it. People will spend forty-five minutes comparing phone specs before buying a $1,000 device but drop $50,000 on a stock because it was “trending” on a finance subreddit. That is not investing. That is gambling with extra steps.

Circle of Competence: Invest Only in What You Know

Circle of competence is one of those investing ideas that sounds almost too simple to be useful. You invest in what you understand and avoid what you do not. That is it. Three seconds to explain, a lifetime to actually follow. Because the problem is never understanding the concept – the problem is that your ego will fight you every step of the way. Every hot stock tip from your coworker, every breathless headline about a sector you know nothing about, every fear of missing out on the next big thing – all of it is designed to pull you outside the boundary of what you actually know. And outside that boundary is where the expensive lessons live.

7 Common Investing Mistakes That Destroy Returns

Common investing mistakes destroy more wealth than bad markets ever will. The S&P 500 has returned roughly 10% annually over the past century, yet the average individual investor consistently earns far less. Not because the market is rigged. Not because they lack access. Because they keep making the same preventable errors, year after year, cycle after cycle.

Stock Buybacks vs Dividends: Which Creates More Value

Stock buybacks and dividends are the two main ways a company returns cash to shareholders. That sentence sounds simple, and it is. But the difference between the two, and how management chooses between them, can make or break your returns over a decade. Most investors treat both as equally good news. They are not. One of them has a nasty habit of destroying value when done poorly, and the other can quietly drain a company’s reinvestment capacity. The details matter.

Why Capital Allocation Is the Most Important Skill

Capital allocation is the single most important job a CEO has, and almost nobody talks about it. Not on CNBC, not in business school, not at dinner parties. People talk about product vision, leadership style, corporate culture – all fine things. But when a company generates a billion dollars in free cash flow, the decision of what to do with that money will determine shareholder returns for the next decade. Get it right, and you create enormous wealth. Get it wrong, and you destroy it – quietly, invisibly, one bad acquisition at a time.

PascalFi

PascalFi explores the intersection of quantitative methods and practical investing. Named after Blaise Pascal, the mathematician who laid the groundwork for probability theory, this blog applies data-driven thinking to investment decisions. The art …

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