Muscular Investing

Brian Livingston
About the author: is the author of Muscular Portfolios (2018), which reveals the 21st century's best-performing long-term trading strategies, and editor of the free Muscular Portfolios Newsletter. He is also the coauthor of 11 Windows Secrets books (1991-2007). He has been assistant IT manager of UBS Securities, a consultant to Morgan Guaranty Trust (now JPMorgan Chase), and technology adviser to Lazard Ltd., all in New York City. His columns appear in the Muscular Investing blog most Tuesday and Thursday mornings. Learn More

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Muscular Investing

The 7Twelve Portfolio Greatly Improves with a Momentum Rule

by Brian Livingston

If you own 12 ETFs in equal weights at all times, you’re probably following the 7Twelve strategy, which holds more assets than other Lazy Portfolios. • The extra asset classes give 7Twelve some exposure to commodities and natural resources, which competing portfolios lack. Best of all, the broader menu allows 7Twelve to greatly improve, with much better gains and far smaller losses, when you add a simple Momentum Rule. Figure 1. Craig Israelsen’s strategy attempts to give investors exposure to seven global asset classes by holding 12 different funds at Read More 

Muscular Investing

The Coward's Portfolio Is More Profitable with One Rule Added, But...

by Brian Livingston

You can boost the gains of the so-called Coward’s Portfolio (aka the Smart Money Portfolio) by adding one easy tweak, but watch out — there’s a catch. • The strategy is not really for scaredy-cats but for people who don’t like surprises in their investments. A single extra step makes a big improvement in the portfolio’s returns, although you have to live with a serious trade-off. Figure 1. For the nervous investor, the Coward’s Portfolio offers a broad set of assets, if that kind of thing reassures you. Photo by Spiber.de/Shutterstock. Read More 

Muscular Investing

Make Your Lazy Portfolio More Muscular

by Brian Livingston

An investing fad called ‘Lazy Portfolios’ took hold in the 1990s. Just allocate fixed percentages of your money to every asset out there, it said. • Diversification is good, but these strategies seriously lag the S&P 500. And they’re risky, crashing almost as badly as the index. Fortunately, adding one easy step is all it takes to improve your gains and lower your losses. Figure 1. Lazy Portfolios never change their positions, except perhaps to rebalance back to their original percentages once a year. Photo by Comaniciu Dan/123RF. Read More 

Muscular Investing

Use Currency to Your Advantage, and Turn That Frown Upside-Down

by Brian Livingston

Changes in foreign-exchange prices may be too random to predict. But you can still use currency fluctuations to enhance your portfolio. • The trick is that many commodities, such as oil and gold, are priced in US dollars worldwide. A weak dollar or hyperinflation tends to make commodities and precious metals go up, measured in greenbacks. Figure 1. Photo of folded $5 bills by Juequian Fang. • Part 4 of a series. Parts 1, 2, and 3 appeared on May 21, 23, and 28, 2019. • In previous parts of this series, we saw that the vast majority of currency Read More 

Muscular Investing

Currency Movements May Be Too Weird for You to Make Profits

by Brian Livingston

Like many things that individuals try when trading against the professionals, foreign currencies look easy but are actually hard to eke a profit out of. • Unless you have some amazing, unheard-of talent, there may be no strategy that can consistently make you a winner at trading currencies. Even sophisticated funds that specialize in currencies don’t greatly profit. Figure 1. Currency movements look easy to predict but may be too random to reliably extract profits from. Illustration by Kaspri/Dreamstime. • Part 3 of a series. Parts 1 and 2 appeared on Read More 

Muscular Investing

Even When Your Funds Are Gone, the Game Might Not Be Over

by Brian Livingston

Foreign-exchange dealers offer enormous leverage to customers, and leverage can lead to enormous losses — greater than your entire balance. • Experience with global currency-trading brokers shows that they value the profits they earn from traders so much that even some busted account holders can be forgiven their debts, if it will keep the traders paying commissions and fees. Figure 1. Leverage can quickly put your account balance underwater, but even that may not stop traders at certain foreign-exchange brokers. Photo by Zwiebackesser/Shutterstock. • Read More 

Muscular Investing

Currency Trading is a Great Way to Lose Money

by Brian Livingston

Studies show that although 84% of currency traders think they can make profits, only 30% actually do. What can we learn from this fact? • People are vastly overconfident in their ability to wring gains from what seems like a simple game. In currency-dealer records, traders win more than 50% of their bets, but their losing trades cost almost double what the winning ones make. Figure 1. The idea of making profits from currency trading can fill us with wild expectations of riches, but it ain’t necessarily so. Photo by Roman Samborskyi/Shutterstock. • Tens Read More 

Muscular Investing

How to Invest Without Suffering from Behavioral Biases

by Brian Livingston

We make poor decisions when presented with financial data, because the subsconscious mind is in control of our interpretation of the facts. • Simply saying, ‘I will not be affected by my subconscious mind,’ is pointless. That very statement could well be another head-fake by parts of your brain that are not apparent. Fortunately, we now have tools to make better choices. Figure 1. Our subconscious mind is constantly making us see things that are not there, all the while reassuring us that the actions it directs are the most rational and logical steps we can take. Photo by Read More 

Muscular Investing

When to Use a Computer and When to Use Your Brain

by Brian Livingston

It’s well-established that computers outperform the best human players in chess, poker, Go, and other skills. The same is true in the game of investing. • We can use this fact to boost our long-term performance. Simple computer formulas outdo financial experts. Their minds and ours are clouded with ‘behavioral biases’ that economists have proved are baked into our human decision-making processes. • Part 3 of a series. Parts 1 and 2 appeared on May 7 and 9, 2019. Photo by VG Stock Studio/Shutterstock. • In Parts 1 and 2 of this series, we’ve seen Read More 

Muscular Investing

Paper Trading Is Not the Same as Serious Money Trading

by Brian Livingston

To learn how to invest, people often try ‘paper trading.’ This technique means buying and selling only in theory, without any actual money involved. • It may not be that simple. Research shows that people take on MORE RISK after a paper loss, but do EXACTLY THE OPPOSITE when a loss is realized with their own dollars. That leads to different results. Figure 1. Paper trading seems to encourage greater risk-taking than serious money trading, especially when the investor has recently experienced a losing trade. Photo by Pressmaster/Shutterstock. • Part 2 of a series Read More 

Muscular Investing

To Make More Profit in the Market, It Helps If You're Brain-Damaged

by Brian Livingston

Patients with damage in the part of the brain that monitors risk make more money in a simple investing game than normal people. We can learn from this. • Everything about a modern stock market involves random events and the chance of loss. How we deal with that can determine how profitable our investing turns out. Being ‘ordinary’ sometimes doesn’t make as much profit as being a little contrary. Figure 1. Our unconscious behaviors hurt our investment performance, but a little sideways thinking can improve our gains. Photo by Sunny Studio/Shutterstock Read More 

Muscular Investing

Broad-Based Investment Pools Arise for Affordable Housing

by Brian Livingston

The slow rate of housing development in many cities is causing a crisis of affordability. Solving the problem can be profitable. • With the release of  regulations by the US Treasury only days ago, organizations are now pooling small investors’ funds for development within so-called Opportunity Zones. Knowing how these pools work can help you diversify your portfolio with physical real estate. Figure 1. Many cities have a shortage of affordable housing, making uninhabited (and currently uninhabitable) units ripe for moderate-income residential Read More 

Muscular Investing

New Opportunity Zone Regulations Make Real Estate More Profitable

by Brian Livingston

For those who want to deal with physical property, the profit potential of real estate is clear. Now it can be an even better investment. • Congress authorized special ‘Opportunity Zones’ in 2017, but the necessary federal regulations weren’t released until just last week. The Treasury’s announcement is the starting gun for a 10-year period in which you pay NO CAPITAL-GAINS TAX on investments in these zones. Figure 1. Profitable real-estate investments have just become a lot MORE profitable, thanks to tax-free gains that Congress has authorized for the Read More 

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