Featured and Latest Posts
Value vs Growth Investing
Value or growth? It’s one of investing’s most enduring questions. Growth stocks like Apple and Nvidia promise future riches, whilst value stocks—often out-of-favour firms like Ford or BP—appear cheap today. History suggests that value has delivered higher long-term returns, but not without discomfort.
Some believe that the value premium reflects added risk; others see investor bias and overreaction. As John Cochrane jokes, everyone wants the higher returns of value stocks—until they find out which ones they’d actually have to buy. ‘There you go,’ he says, ‘that’s the value premium.’
Despite recent challenges, the case for value remains compelling—especially when valuation gaps are wide. Tools like Research Affiliates’ Asset Allocation Interactive, which I highly recommend, highlight its long-term potential.
How Should You Spend in Retirement? Fixed vs Dynamic Withdrawal Strategies
Retirement doesn’t mean the end of financial planning—it’s just the start of a new phase. The big question shifts from ‘how much should I save?’ to ‘how much can I safely spend?’ This deceptively simple issue—known as your withdrawal strategy—has generated decades of research, debate, and rule-of-thumb solutions.
Should you stick to a fixed rule like the classic 4% approach? Or should your spending flex with the markets to reduce the risk of running out of money?
In this post, we examine fixed vs dynamic withdrawal strategies, the academic evidence behind them, and—crucially—how to balance what’s financially sound with what’s emotionally sustainable. Because at the end of the day, retirement is about living well—not living anxiously.
Why the DCF Model Doesn’t Work for Options—and How Black-Scholes-Merton Changed Everything
Most finance textbooks start with the discounted cash flow (DCF) model—project the cash flows, pick a discount rate, and voilà: you’ve got a valuation. It’s neat, tidy, and timeless.
But try applying it to an option and the whole thing falls apart.
Options don’t behave like bonds or businesses. Their value hinges not on steady cash flows but on uncertainty, volatility, and probability. And that’s precisely why the DCF model fails—and why a revolutionary model was needed. Enter the Black-Scholes-Merton model: a groundbreaking approach that reimagined valuation through the lens of hedging, replication, and risk-neutral probabilities.
This post explores why options broke the DCF mould—and how Black, Scholes, and Merton changed finance forever.
Rethinking Risk and Return: The Intertemporal Capital Asset Pricing Model (ICAPM)
The Capital Asset Pricing Model (CAPM) remains a cornerstone of modern finance, showing how risk and return are linked through a single factor: market beta. But real-world investors care about more than just today’s risk—they care about how their investment opportunities change over time. That’s where the Intertemporal Capital Asset Pricing Model (ICAPM) comes in. Introduced by Merton (1973), the ICAPM extends the CAPM’s single-period framework to a dynamic, multi-period world, where investors hedge against changes in income, inflation, volatility, and other economic risks. This post explores how the ICAPM reframes asset pricing, explains anomalies, and offers a more realistic foundation for portfolio construction and long-term investing.
Good financial decisions aren’t about predicting the future—they’re about following a sound process today.
In investing, outcomes are noisy. Short-term performance often reflects randomness, not skill. Yet fund managers continue to pitch five-year track records as if they prove anything. They don’t.
As Ken French puts it, a five-year chart ‘tells you nothing’. The real skill lies in filtering out the noise—evaluating strategy, incentives, costs, and behavioural fit.
Don’t chase what worked recently. Stick with what works reliably.