5 Learning Points from Adventures’ decade in investing

I have been reading a bit on the journey of Adventures, a fund that invests in family-owned businesses in North America, which is detailed in their article titled A decade in reflection. The article reflects on their ten-year journey to 2017 and delivers on some delicious nuggets of wisdom for any student of investing. Here are my five points from the article.

Knowing that you do not know everything:

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Notes: Thinking of Fixed Income

One of the excellent podcasts out there to look at, if you are interested in financial markets, is the Odd Lots Podcast at Bloomberg. This week, the hosts, Joe Weisenthal and Tracy Alloway,  welcomed David Schawel,  a manager of Fixed income portfolios at New River Investments. If you are looking for quick insights into how a bond portfolio manager thinks, this is a good podcast.

I took note of three points to take note of if you seek to invest in Fixed Income:

  1. Check the risk profile of the bonds: It is important to examine the different types of risks that a fixed income portfolio is exposed to. David Schwell focuses on four risks: duration (sensitivity of bond prices to changes in interest rates), liquidity (how quickly can asset be sold with minimal loss), credit risk (the risk of default on a bond) and leverage (amount of debt used to finance the bonds).
  2. Perform a scenario analysis – Having the humility that what you think is going to happen may not happen and thus paying attention to the different scenarios that may happen. A big thing to look at is not just yields but also loss-adjusted yield.
  3. The benefits of diversification – Not all bonds will win for you at the same time. A bond which in isolation may not be favourable may be favourable in a portfolio.

Check out the 20 minute podcast here.