Introducing my new blog

Greetings fellow investors. I’m starting a new blog about investing. I’m a finance professor at the Ivey Business School at Western University, in Canada, where I’ve been teaching finance and investments, and researching about stocks and investing for over thirty years. I have a PhD in finance from the University of Pennsylvania’s Wharton School, and I have a Chartered Financial Analyst designation. I’ve served on foundations, endowments, and pension boards; I have a consulting company; and I’ve provided expert witness testimony about investments, in federal court.

Most recently, I’ve co-authored (with Andrew Lo at MIT) In…

Buying stock of publicly traded companies that own bitcoin is an indirect — but not necessarily rewarding — way to invest in crypto

Photo by Executium on Unsplash

Bitcoin has been in the news in the past week on several different fronts. El Salvador, which doesn’t have its own currency, became the first country to make bitcoin legal tender for all debts. MicroStrategy Inc., a provider of analytics software and services — the public company that owns the most bitcoins and whose CEO, Michael Saylor, is encouraging other firms to hold bitcoins within their treasury departments — doubled-down by issuing $500 million in debt in order to buy more bitcoins. And bitcoin prices got a boost from a tweet by (who else?) Elon Musk, who indicated that Tesla…

6 original charts that show returns, risk, trading volume, short-interest, and outlook for meme stocks versus FAANG stocks

Photos by Bill Jelen on Unsplash and by NASA on Unsplash

The stock prices of GameStop Corp. (GME) and AMC Entertainment Holdings, Inc. (AMC) continue on their wild rides in 2021. This year AMC is up over 2,600 percent percent and GME is up over 1,500 percent. They are two of the so-called meme stocks along with, Bed Bath & Beyond, Blackberry, Sundial Growers, and others. Can the ascent of these meme stocks continue to the moon or will short-sellers like hedge funds prevail and send prices crashing back to earth? We’ve seen fights like this before, particularly during the dot-com era. I’ll explain what meme stocks are and examine the…

It matters how we think about risk and return

Photo by Klim Musalimov on Unsplash

Today, during the National Hockey League (NHL) playoffs, I get to write about two of my favorite topics: investing and hockey (ice hockey, of course — as a stereotypical Canadian who’s skated on frozen ponds and backyard rinks since the age of four, could I be talking about any other kind?). One specific aspect of hockey holds valuable lessons for investors: the exciting time late in a game when the coach of the team that’s behind in the score replaces the goalie with an extra attacker.

I’ll summarize and add my thoughts to a provocative and popular paper by Cliff…

What the renowned scientist’s 18th-century market misadventures can teach us about the crypto markets today

“Isaac Newton” by paukrus is licensed under CC BY-SA 2.0. Photo by Clay Banks on Unsplash.

When you think of Sir Isaac Newton, what comes to mind? For me, it’s an image of him sitting under an apple tree, being hit in the head by falling fruit and suddenly coming up with the law of gravity. (I did some fact-checking and found that the concept of gravitation did come to Newton’s mind when apples occasionally fell as he sat under an apple tree, while in a contemplative mood, and that famous apple tree still grows at his childhood home, Woolsthrope Manor near Grantham, England — but there’s no evidence suggesting an apple actually hit him on…

Like the weather, the outlook can change quickly

Is that a lightning bolt, or last weeek’s bitcoin price chart? (Photo by Brandon Morgan on Unsplash)

I recently wrote about bitcoin’s risk and return. One of the take-aways was: “Bitcoin offers over-sized risks for the potential returns, with volatility that is orders of magnitude greater than with traditional investments.” Two weeks later — an eternity in crypto-investing — we can see that the volatility is there. Writing about bitcoin is like writing about the weather in an ever-changing climate — you can start writing about the thunderstorms and when you think you are done, the sun comes out, so depending on when you are reading this, the weather may have changed. …

A revolutionary innovation from 1780 can protect your portfolio from inflation

Photo by Sean Robertson on Unsplash

In the late 1770s, the Revolutionary War wasn’t going well for America. The British Army had captured Georgia and Charleston South Carolina, and the British Navy was blocking the U.S. eastern coast. U.S. Army morale was low as the troops were poorly clothed, poorly fed, and often in need of medical attention. Mutinies were a real threat. Also sapping morale was another enemy: soldiers were facing a loss of value of their pay due to inflation.

But in 1780, The Commonwealth of Massachusetts rode to the rescue, with a financial innovation that perhaps played a small role in the eventual…

Jack Bogle’s “masterly inactivity” mantra applies to the worlds of warfare, sports, parenting, and markets

Andrew Lo’s interview with Jack Bogle, In Pursuit of the Perfect Portfolio project

I have one regret related to the writing of our book, In Pursuit of the Perfect Portfolio: The Stories, Voices, and Key Insights of the Pioneers Who Shaped the Way We Invest. We conducted interviews with each of the ten featured investment luminaries, but I didn’t have the opportunity to meet the late Jack Bogle — my coauthor, Andrew Lo, had the pleasure of interviewing him. Bogle was the founder of The Vanguard Group, known for its low-cost index funds, a firm that had over $5 trillion in assets under management at the time of his passing in 2019. Perhaps…

In memory of an investment legend

Image from Yale Investments Office

David Swensen, Yale University’s endowment fund long-time chief investment officer, recently passed away after a long battle with cancer. A dedicated man who believed in giving back, two days before his passing, he taught the last class for the term for his Investment Analysis course at Yale University. He grew Yale’s endowment fund from $1 billion when he started in 1985, to over $31 billion in 2020. He embraced a diversification model that became known simple as the Yale Model, but should probably be called the Swensen Model. …

A finance professor explains how Bitcoin has really performed relative to the stock market

Photo by Harrison Kugler on Unsplash

What’s bitcoin really like as a potential investment, and how does it compare with traditional investments in terms of risks and recent returns? Will bitcoin soon be part of a new cryptocurrency asset class that all investors should consider as part of their investment portfolio? We now have over six-and-a-half years of price data since mid-September 2014, when U.S. regulators approved the first derivative product involving bitcoin. So, to answer those questions, I gathered and analyzed price data on bitcoin, the S&P 500, a bond index, gold, the dollar, and the FANG growth stocks — Facebook, Amazon, Netflix, and Google…

Stephen Foerster

I’m a Finance prof, CFA, and author of In Pursuit of the Perfect Portfolio (with Andrew Lo). I write stories about investing. (I don’t give financial advice.)

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