Many investors look ahead to decide if a stock is cheap or expensive. To do that, they use the forward P/E ratio, and based on that number, they conclude if a stock is cheap or expensive. But here’s the problem: not all earnings are the same.

Companies can report different versions of earnings, and the difference between them can be significant. That means a stock that looks cheap can actually be much more expensive. And that has a direct impact on valuation.

That’s why it’s so important to understand which earnings you’re using when valuing a company, and how they can lead to very different valuations.

In this article, we’ll break down the two types of earnings: GAAP and non-GAAP.

You’ll learn:
📊 what the key differences are between GAAP and non-GAAP
🧾 what is included (and what is excluded)
🎯 how they impact valuation

We’ll also use a real-world example to show how big the difference can be.

Let’s start with GAAP, the official way companies report earnings.

📊 What is GAAP?

GAAP stands for Generally Accepted Accounting Principles. It’s the industry standard for reporting financial results, which makes companies comparable. These are the numbers you’ll find in their income statements.

GAAP includes all costs. That means the following is included:

• operating expenses

• interest and taxes

• stock-based compensation

• restructuring and other charges

These are all costs related to running the business. Nothing is excluded, which means GAAP reflects the full financial picture of a company’s performance.

GAAP earnings show what a company actually earned over a period. There are no adjustments, no “cleaned” numbers, and no exclusions to make results look better. It reflects the true bottom line.

Because GAAP includes everything, earnings can sometimes look lower, especially in the short term. One-time charges, restructuring costs, or acquisition-related expenses can impact results in a given quarter or year. That doesn’t always mean the underlying business is weaker.

If you want to understand a company’s profitability, GAAP is your starting point. It shows what is actually reported and what shareholders are left with. But GAAP doesn’t tell the whole story about how a business is performing. That’s where non-GAAP comes in.

📊 What is Non-GAAP?

Non-GAAP earnings are adjusted numbers. Companies start with their GAAP results and then exclude costs. These are costs such as:

• stock-based compensation

• restructuring costs

• acquisition-related expenses

• other “one-time” items

The goal is to show a clearer view of the underlying business. One example of a non-GAAP metric is EBITDA, which excludes interest, taxes, depreciation and amortization. This allows non-GAAP to focus more on the core performance.

Unlike GAAP, non-GAAP is not standardized. Companies decide what they exclude and how they present these numbers, which means results are not always comparable.

Non-GAAP is a useful way to understand how a business is performing without short-term impact. However, it’s important to be careful. Some of the costs that are excluded are not always one-time. Stock-based compensation, for example, is often excluded, while it is a recurring cost for many companies. This can make earnings look higher than they are.

Non-GAAP can help you understand the business, but it doesn’t always show the full picture when valuing a company.

Source: The Motley Fool

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🎯 The Impact on Valuation

Most investors use the forward P/E ratio to value a company, meaning they look at expected future earnings. But here’s the problem: the “E” in that ratio is often based on non-GAAP EPS.

As discussed earlier, this means costs such as stock-based compensation, restructuring costs, and acquisition-related expenses are excluded. As a result, the EPS used in the forward P/E is often higher than the actual EPS, which leads to a lower P/E ratio.

For example, a stock might trade at a forward P/E of 25, which at first glance can look reasonable. However, that multiple is based on non-GAAP EPS. If you instead look at GAAP EPS, those costs are included, which usually results in lower earnings, especially for growth companies where stock-based compensation can be significant.

The same stock trading at 25x non-GAAP EPS might actually trade at 40x or more based on GAAP EPS. It’s the same company and the same business, but a very different valuation.

This is where many investors get it wrong, and it’s not just theory. Let’s look at a real example: Axon Enterprise.

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🛡️ Example: Axon Enterprise

The difference between GAAP and non-GAAP can have a big impact on valuation. You often see this with high-growth companies. Let’s take Axon as an example.

As you can see in the image below, for Q4 2025, Axon reported a non-GAAP net income of $177.8 million and an EPS of $2.15. But on a GAAP basis, net income was just $2.7 million, with EPS of only $0.03.

The biggest impact comes from stock-based compensation, which was $184.5 million in the quarter. This has a major impact on reported earnings and brings net income close to zero.

So GAAP EPS is much lower than non-GAAP EPS, and that’s exactly the point, because GAAP EPS is the actual “E” used in the trailing (TTM) P/E ratio.

Source: Q4 2025 Axon Enterprise Shareholder Letter

At the current share price of $402.85 and a GAAP EPS of $1.51, Axon trades at a P/E ratio of 267.

If we look, like many investors do, at Axon’s forward P/E ratio for 2026, it is 51.7 (source: GuruFocus). At first, that may look reasonable. You might think earnings will grow quickly and the valuation will come down next year. But here’s the problem: that 51.7 is based on non-GAAP EPS of 7.79, which means costs are excluded. And we know that can have a big impact on the valuation.

The expected GAAP EPS for 2026 is 1.68. Based on that, the real forward P/E at the current stock price would be around 240.

Still very high, and very different from what the forward P/E shows.

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📌 Final Takeaway

Not all earnings are the same. GAAP shows the full picture. Non-GAAP shows a cleaner version of the business. Both matter, but for different reasons.

• If you want to understand how a business is performing, non-GAAP helps.

• If you want to value a company, GAAP matters most.

Make sure you understand the numbers and use the right earnings. Otherwise, you risk reaching the wrong conclusions, and making the wrong decisions. Good luck!

Thank you for reading! 🙏
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That’s it for today.
We’ll see you again in the next edition of our newsletter!

Until then, invest wisely.

Vincent & Stefan
The Future Investors

Disclaimer:
The information and opinions provided in this article are for informational and educational purposes only and should not be considered as investment advice or a recommendation to buy, sell, or hold any financial product, security, or asset. The Future Investors does not provide personalized investment advice and is not a licensed financial advisor. Always do your own research before making any investment decisions and consult with a qualified financial professional before making any investment decisions. Please consult the general disclaimer for more details.

Most investors think they’ve found a bargain when a stock looks cheap, like:

• A low P/E

• A big drawdown

• A company that “used to be great”

It feels like an opportunity. But more often than not… it’s a value trap 🚩

At the same time, some of the best investments start exactly like that — beaten down and overlooked, right before they turn into big winners 🚀

So how do you spot the difference? On the surface, they look the same.
But underneath, the reality is very different.

📉 The Illusion of “Cheap”

A stock doesn’t become cheap by accident. In most cases, the market isn’t wrong, it’s reacting to something real, like:

• ⏳ Slowing growth

• ⚔️ Increasing competition

• 📊 Declining margins

• 🧩 A broken business model

That’s why many stocks don’t just look cheap… they stay cheap, sometimes for years.

And that’s where investors get trapped. They look at the past, remember what the company used to be, and assume it will go back.

But the market isn’t pricing the past. It’s pricing the future. And if that future doesn’t improve, the stock won’t improve.

Because two stocks can look equally cheap, but for very different reasons. One is broken and getting worse. The other looks broken, but starting to improve. They may look the same… but they’re not.

⚖️ Value Trap vs Turnaround

So how do you actually spot the difference? It comes down to one thing:

Is the business getting better or worse?

Value Trap 🚩
A value trap isn’t just a cheap stock, it’s a business that keeps moving in the wrong direction.

The problems don’t get fixed. In many cases, they get worse over time. Revenue growth slows or turns negative, margins come under pressure, and the company starts to lose market share.

The stock may look attractive. It’s down a lot. Valuation looks low. But the business is not improving. And without real improvement, the story doesn’t change. That’s why it stays cheap.

Turnaround 🚀
A turnaround can look the same at first. The stock is down, sentiment is weak, and valuation looks low.

But here, the direction is starting to change. Revenue begins to stabilize or grow again. Margins improve. The company starts to gain strength again. Management takes the right actions.

These changes are often small at first, but the business is improving and that’s where the opportunity lies.

The Difference That Matters
The biggest difference isn’t valuation. It’s direction. One business is not improving and keeps moving in the wrong direction. The other is improving and starting to move in the right direction. Over time, that difference compounds. And that’s what separates value traps from real opportunities.

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🔍 How to Spot the Difference

If you want to avoid value traps and find real turnarounds, you need to look beyond valuation. Ask yourself the following 3 questions:

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At The Future Investors, we believe fundamentals matter more than valuation. As Warren Buffett famously said:

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

That’s why, before we invest in any stock, we always begin with a complete analysis of its fundamentals. It’s the fundamentals that ultimately drive a stock’s long-term potential.

Fundamental Scoring Framework

To make this systematic, we developed our Fundamental Scoring Framework, which evaluates every company across three key areas: Management, Market, and Financials & Growth.

Each area contains multiple elements — 19 in total — and each element is scored individually. These scores are then combined into a final score from 0 to 100, reflecting how fundamentally attractive we believe the company is as an investment. The scoring scale is as follows:

🔴 Below 50 → Uninvestable
🟠 50 - 59 → Questionable
🟡 60 - 69 → Reasonable
🟢 70 - 79 → Quality
🔵 80 - 89 → High-Quality
🟣 90 or above → Exceptional

Through our Unpacked series, our monthly deep dive where we “unpack” a company, we’ve already shared scores for many businesses. Some of the companies we’ve covered include SoFi, Axon, MongoDB, and MercadoLibre. You can explore all previous Unpacked editions here.

Now, we’re giving you a clear look behind the curtain: explore the principles behind our Fundamental Scoring Framework. This is the system we use to evaluate companies on fundamentals, assign scores, and identify the highest-quality companies.

Here are a few companies we analyzed with their final scores 👇

Oscar Health: 🟠 55 → Questionable
McDonalds: 🟡 66 → Reasonable
Astera Labs: 🟢 76 → Quality
ServiceNow: 🔵 81 → High-Quality
Nvidia: 🟣 94 → Exceptional

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Beating the market looks simple. In reality, most investors underperform.
Over the past decades, the S&P 500 returned 7%-8%, while the average investor earned far less.

How is that possible? What does underperformance cost over the long term — and what can you do to improve your chances of beating the market?

In this article, we explore these questions through three parts:

👁️ The Reality: the cost of underperformance
🧠 The Cause: why investors underperform the market
🎯 The Solution: how you can beat the market

👁️ The Reality

Research from J.P. Morgan Asset Management shows that over the 20-year period from 2001 to 2020, the S&P 500 delivered an average annual return of 7.5%, while the average investor earned just 2.9%. In other words: most investors don’t beat the market — they underperform it.

On paper, the difference between 7.5% and 2.9% looks small. In practice, it has a massive impact on long-term returns. Imagine you invest $10,000 today and add $1,000 every month, consistently, for 20 years.

These are the results in the same market:

• S&P 500 at 7.5% → $598,339

• Average investor at 2.9% → $342,588

That’s a $255,751 difference — created in the same market, without better access, and without any special information. Just different behaviour. This gap is known as the behaviour gap: the market delivers long-term returns, while investors capture far less of them.

The reality is simple: underperformance doesn’t cost a few percentage points — it costs years of compounding.

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🧠 The Cause

The gap between market returns and investor returns comes from one thing: behaviour.

The S&P 500 grows automatically over time. Most investors don’t — because they step out of the market for all kinds of reasons. Everyone has access to the same market.The result depends on how you act, not what you know.

Here are the eight main reasons why most investors underperform the market:

1️⃣ Selling during fear
When prices fall, selling feels like protecting your capital. In reality, it locks in losses just before markets recover.

2️⃣ Buying back later
People wait for “confirmation” that things are safe again. Which usually means buying higher than they sold.

3️⃣ Chasing performance
What just worked feels smart. So investors buy last year’s winners, not the next decade’s winners.

4️⃣ Switching strategies
From growth to value, from momentum to safety — driven by emotion. Every switch resets compounding, so nothing works long enough.

5️⃣ Trying to time the market
Looking for the perfect entry or exit rarely works. Missing just a few strong days can halve total returns.

6️⃣ Too much cash on the sidelines
Waiting for clarity — elections, recessions, headlines. Meanwhile, the market grows and cash doesn’t.

7️⃣ Overtrading
More trades feel like taking control. But frequent trading means more mistakes, more costs, less compounding.

8️⃣ Not knowing what you own
Many investors buy stocks they don’t truly understand. So when something happens — volatility, headlines, earnings — they can’t explain it and exit quickly. Without conviction, every dip feels like danger, not opportunity.

A painful pattern 😣
Each decision feels rational on its own:

• “I’ll get back in later”

• “I need to protect my gains”

• “It’s safer to wait for confirmation”

• “This time is different”

• “Value is dead, I’m moving to high-growth”

• “If it drops any further, I’m out”

But together they create a consistent pattern:

sell lower, buy higher, repeat

Every cycle interrupts compounding, which is why the average investor earns far less than the market return.

The problem isn’t the market. It’s behaviour.

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🎯 The Solution

You don’t need to beat the market to do well. If you don’t want to fight it, owning the market is a smart strategy.

If you don’t have time to analyse companies yourself, owning the market is often the best option. A low-cost index like the S&P 500 gives you:

• long-term growth

• built-in diversification

• strong historic returns

• no stock picking or timing

It’s simple. It works. And it takes very little time.

In many cases, the S&P 500 beats the average stock picker anyway. So owning the index is not a “second-best” choice — it’s a great way to build wealth.

But if you do want to try and beat the market, it is possible. You just need to focus on the factors that actually drive better results over time: quality, conviction, and patience.

Here are six principles that will increase your chances of outperforming the index:

💎 Own quality businesses
Better results come from companies that grow and reinvest their own profits. Look for:

• strong competitive position

• high returns on capital

• consistent cash flow

• pricing power

• a long path for growth

When a business compounds from the inside, the share price follows.

🔍 Know what you own
It’s much easier to hold a stock when you understand the business. Know:

• how the company earns money

• where the moat is

• who the competitors are

• how management uses capital

• what the long-term story is

If you understand the business, price swings don’t feel like danger. Without understanding, every dip feels scary — and people sell too fast.

👤 Think like an owner
Traders follow price. Owners follow progress.

Owners don’t sell because the stock fell last week.
They ask: “Is the business improving?”

Ownership creates conviction — and conviction helps you stay invested.

⏳ Hold longer than feels comfortable
Compounding takes time, often years. The biggest gains usually come after long periods of holding, not from a quick trade.

If your holding period is one year, you’re not trying to beat the market —
you’re trying to predict it. Long time horizons reduce the need to be perfect.

🔁 Don’t interrupt compounding
Selling during fear resets the clock. Every time you step out of the market:

• compounding stops

• you wait for comfort

• you buy back higher

Do that a few times in a decade, and the index wins easily. Staying invested does more work than being right.

📌 Stick to one strategy
You can’t beat the market by switching styles every year.

Value in one cycle, growth in the next, small caps after that…
That isn’t a strategy — it’s reacting to headlines.

Choose a simple approach you believe in and keep it through ups and downs.
Consistency beats trying to be clever.

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Beating the market isn’t about finding secrets, it’s about avoiding the mistakes most investors make. Stay invested. Stay consistent. Let compounding do the work.

Most people try to win through action. The real edge comes from discipline, patience, and a process you can hold through every cycle. And if you want to do better than average — own quality businesses you understand, and give them enough time to compound.

Thank you for reading! 🙏
We put a lot of love into creating this post for you. If you enjoyed it, feel free to click the ❤️ button so more people can discover it on Substack or hit the ↪️ share button to share it with friends, family and fellow investors!

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Don’t hesitate to share your thoughts in the comments — we’d love to hear from you 💬

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That’s it for today.
We’ll see you again in the next edition of our newsletter!

Until then, invest wisely.

Vincent & Stefan
The Future Investors

Disclaimer:
The information and opinions provided in this article are for informational and educational purposes only and should not be considered as investment advice or a recommendation to buy, sell, or hold any financial product, security, or asset. The Future Investors does not provide personalized investment advice and is not a licensed financial advisor. Always do your own research before making any investment decisions and consult with a qualified financial professional before making any investment decisions. Please consult the general disclaimer for more details.

Every investor loves to talk about buying — discovering bargains, spotting the next multibagger, or investing early in a trend that’s starting to grow. But there’s far less talk about the other side — when to sell a stock.

Selling might seem easy, but it’s often the hardest part of investing. Do you take some profits after a big run? Sell when the stock keeps dropping? Or stay invested because you still believe in the company’s future?

Selling isn’t just about numbers, it’s about choices. It brings doubt, emotion, and the constant thought that you might have made the wrong decision. That’s why so many investors struggle with it.

In this article, you’ll learn why selling is one of the hardest parts of investing, when it’s the right time to sell, and when it’s better to hold. Let’s start with the psychology behind it — selling isn’t just about numbers, it’s also about emotions.

🧠 Why Selling Is So Hard

Buying a stock often feels exciting — it’s a sign of optimism and opportunity. But selling is different. It’s about making choices when things feel uncertain, and that’s something almost every investor struggles with.

When you buy, everything seems clear: you believe in the company, the numbers look good, and the story makes sense. But when it’s time to sell, doubt starts to build. Should you take profits after a strong run? Wait a little longer and risk losing those gains? Or hold on because you still believe the company has more room to grow?

Selling isn’t just hard when things go wrong — it’s also difficult when things go right. Letting go of a winning stock can feel just as uncomfortable as selling one that didn’t work out.

A big reason for that is psychology:

• Loss aversion: we feel the pain of a loss much stronger than the joy of a gain.

• Fear of missing out: we hate the thought of selling too soon and watching the stock climb higher.

• Ego: it’s hard to accept that your original idea has played out — or that you might have been wrong.

These emotions make selling tricky in both situations. They can make us hold on to weak stocks for too long, or sell great ones too early.

The best investors know this. They stay calm, follow their plan, and don’t let emotions drive their decisions.

As Morgan Housel once said:

“Controlling your emotions is the most important investment skill you’ll ever have.”

If you can learn to stay calm when everyone else is emotional, you’ll already be ahead of most investors.

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🎯 When It Does Make Sense to Sell

Selling doesn’t always mean you’ve made a mistake. Sometimes, it’s a smart thing to do. There’s no perfect timing, but there are moments when selling can make sense.

1️⃣ When the fundamentals change 📉
Every stock you buy should have an investment case — a reason you believe it can grow and create value over time. You invest because the company is growing fast, has strong margins, or is led by great management. But when that story changes — growth slows, profits drop, or leadership loses focus — it’s time to take another look.

If the fundamentals no longer make sense, holding on just because you own it usually doesn’t work out well. The best investors sell when the facts change, not their feelings.

2️⃣ When the valuation gets too high 💰
Even great companies can become risky when their valuation reaches extreme levels.
If a stock price runs way ahead of the company’s actual performance, it can be smart to take some profits or trim your position.

You don’t need to sell everything — just taking a little off the table can help you manage risk and stay balanced.

3️⃣ When there are better opportunities 🔄
Sometimes, selling isn’t about what’s wrong with a company, it’s about finding a better opportunity for your money. When you find a stronger business with more growth, higher margins, and better management, it can make sense to move your money there.

Good investing isn’t just about finding winners — it’s about knowing where your money has the most potential to grow.

4️⃣ When a position becomes too large 📊
When a stock performs well, it can slowly turn into too big a part of your portfolio.
Even a great company can add risk when the valuation is already high and the position takes up a large share of your portfolio.

Selling some shares isn’t weakness — it’s about staying disciplined and protecting what you’ve built.

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🧘‍♂️ When You Shouldn’t Sell

After talking about when selling can make sense, it’s just as important to know when it doesn’t. Most of the time, the best move isn’t to sell — it’s to stay patient.

If you own strong, long-term businesses with a clear investment story, you don’t want to sell just because the stock moves up or down. Real wealth comes from giving great companies the time to grow, reinvest, and compound over many years.

1️⃣ When your thesis is still intact 💡
If the reasons you bought a company are still there, there’s no reason to sell. Short-term price swings don’t change long-term quality. If the business is still doing well, stay confident in your decision.

2️⃣ When a stock looks expensive, but the business keeps growing 💰
It often feels smart to sell when a stock looks pricey. But great companies can stay expensive for a long time — and they usually grow into those valuations over time.
Selling too soon can mean missing years of compounding and value creation.

3️⃣ When the price drops, but the business hasn’t changed 📉
Stock prices move up and down all the time, often driven by emotion, not facts.
If a company’s performance is still strong, a lower price isn’t a reason to sell — it’s often a reason to keep holding. The best investors focus on the business, not the noise.

4️⃣ Give compounding time to work ⏳
One of the biggest mistakes investors make is selling too early and breaking the power of compounding. Wealth builds slowly — and only if you give it time to do so.

In the words of Charlie Munger:

“The first rule of compounding is to never interrupt it unnecessarily.”

If the fundamentals are strong and your investment story still makes sense, patience is your greatest advantage. Sometimes, the best move you can make as an investor is no move at all.

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🧩 Bringing It All Together

Knowing when to sell (and when not) is what separates good investors from great ones. Selling isn’t just about timing or numbers — it’s about patience, discipline, and trusting your process.

There are moments when selling makes sense: when the facts change, when a stock becomes too risky, or when better opportunities appear. But more often, the best move is simply to hold on — to let great businesses grow and compounding do its work.

The best investors don’t try to outsmart the market. They focus on owning quality companies, staying calm when emotions rise, and letting time create the results.

Stay patient. Stay focused. And let time work for you ✨

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Thank you for reading! 🙏
We put a lot of love into creating this post for you. If you enjoyed it, feel free to click the ❤️ button so more people can discover it on Substack or hit the ↪️ share button to share it with friends, family and fellow investors!

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Don’t hesitate to share your thoughts in the comments — we’d love to hear from you 💬

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That’s it for today.
We’ll see you again in the next edition of our newsletter!

Until then, invest wisely.

Vincent & Stefan
The Future Investors

Disclaimer:
The information and opinions provided in this article are for informational and educational purposes only and should not be considered as investment advice or a recommendation to buy, sell, or hold any financial product, security, or asset. The Future Investors does not provide personalized investment advice and is not a licensed financial advisor. Always do your own research before making any investment decisions and consult with a qualified financial professional before making any investment decisions. Please consult the general disclaimer for more details.

Every investor asks at some point: How big should my portfolio be — just a few strong bets, or many positions?

Some choose concentration — a small, focused portfolio built on stocks they know inside out. Others prefer diversification — holding plenty of positions to spread risk and smooth out the ride.

At The Future Investors, we see both sides. Buffett made legendary concentrated bets on Apple and Coca-Cola, while index investors quietly built wealth for decades by owning the whole S&P 500.

Both strategies have strengths. Both have weaknesses. And both require a different mindset. But which approach actually works best? Let’s take a closer look — starting with the power of diversification.

🛡️ The Power of Diversification

Diversification means spreading your money so one bad stock can’t break you. It protects against the unexpected — fraud, new regulation, or an entire sector crashing.

It also makes your portfolio easier to hold. With less volatility, it’s simpler to stay invested when markets get rough. That peace of mind makes a big difference.

Diversification also lets you benefit from several trends at once. AI may be booming today, but healthcare or energy could be the leaders tomorrow. By holding more positions, you don’t have to predict the winner — you’ll already own it.

The classic example is the S&P 500. By owning the index, investors earned 8–10% per year on average for decades. Slow, steady, and powerful.

But as a retail investor, you’re not tied to the rules of an index or a fund. You don’t have to trim your winners just because they grow into a large part of your portfolio. That freedom means you can diversify broadly and still let your strongest positions run — something professionals can’t always do.

🎯 The Power of Concentration

Concentration is about putting more weight behind your very best ideas. Instead of owning dozens of stocks, you build a portfolio around the few you believe in most.

The upside is clear: if you’re right, the rewards can be huge. Warren Buffett and Charlie Munger often said that most of Berkshire Hathaway’s success came from just a handful of bets — like Apple, Coca-Cola, and American Express.

The same goes for individual investors. Those who went big on Amazon, Nvidia, or ASML early on saw life-changing returns, simply because they dared to hold a concentrated position and let it grow.

Concentration keeps things simple: with fewer positions, you can know each company inside out, follow the story closely, and invest with conviction. When it works, a few winners can shape your entire portfolio.

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⚠️ The Downsides of Both Strategies

Both diversification and concentration have clear weaknesses.

Too much diversification can hold back your returns. If you own 50 or 100 stocks, even your best ideas won’t make much difference. This is what happens in many mutual funds: they end up looking almost identical to the index, but with extra fees on top. For individual investors, extreme diversification can feel safe but often leads to average results.

Too much concentration, can be painful if you’re wrong. A single Enron, Wirecard, or a mistimed bet on a popular stock can hurt your whole portfolio. With only a handful of positions, there’s very little room for error.

In short:

• Diversification protects you, but may limit your upside.

• Concentration can boost your winners, but also makes mistakes bigger.

🧠 The Psychology Behind the Choice

In the end, your portfolio isn’t just about numbers — it’s about psychology.

Diversification gives peace of mind. When you’re spread across many positions, a single bad stock won’t shake you as much. That makes it easier to stay invested through market ups and downs, which is often the most important factor for long-term success.

Concentration demands a very different mindset. You need deep knowledge, strong conviction, and the ability to hold on when markets turn against you. Not every investor is comfortable seeing 20% of their portfolio drop sharply in a single week — even if they believe in the company long term.

As an investor, ask yourself: Who am I? How do I deal with emotions? What is my temperament? Some investors sleep best knowing they own a little bit of everything. Others can handle volatility more easily, and believe that just a few strong bets are enough to drive their portfolio.

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📈 What Really Works?

There is no one-size-fits-all formula in investing. Both diversification and concentration can work — and both can fail. A diversified portfolio protects you from being too wrong on a single stock or sector, while a concentrated portfolio can turn just a few winners into life-changing results.

The bottom line? Both strategies can outperform. Both can disappoint. Much depends on you as an investor — your knowledge, your temperament, and how you handle emotions when markets get tough.

We ran a poll on X asking our followers how many positions they hold in their portfolio:

A total of 265 investors voted and the opinions are clearly divided.
Concentrated portfolios seem to have a slight edge — 11–20 positions was the most common answer (33%), with 1–10 close behind (29%). Still, many investors also prefer portfolios with more positions: 21–30 (20%) and 30+ (18%).

The takeaway? Investors think very differently about how many stocks to hold in their portfolio.

But what does the research say? Let’s take a look at what studies suggest about the ‘ideal’ number of positions in a portfolio.

🔮 The Magic Number

Research shows that the biggest benefits of diversification come fast. With 8–15 stocks, most company-specific risk is already reduced. From 15 to 20 positions you get a little extra stability — but beyond 20 stocks, the gains are limited.

As the chart below shows, most of the diversification benefit is captured early. By the time you hold around 15–20 stocks, the curve flattens — adding more positions only reduces risk by a tiny margin.

Source: Evans & Archer (1968), Fisher & Lorie (1970), Elton & Gruber (1977)

That’s why many studies suggest the sweet spot lies between 15–20 positions: enough diversification to protect you, while still concentrated enough for your best ideas to make a real impact.

Once you cross 30 positions, you’re essentially replicating the market. It feels safer, but it also means your upside looks more like an index fund — steady, but harder to truly outperform.

👉 In short:

• Under 10 stocks = too concentrated, very high risk.

• 10–15 stocks = most of the risk reduction achieved, but still concentrated.

• 15–20 stocks = the sweet spot for risk/reward.

• 20–30 stocks = fully diversified, but with limited additional benefits.

• 30+ stocks = almost an ETF — safe, but little chance of real outperformance.

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📌 Conclusion

According to studies, the sweet spot for diversification lies around 15–20 stocks. That’s where you balance protection and focus.

But the bigger lesson is this: there’s no one-size-fits-all formula. For some investors, their sweet spot might be fewer positions — for others, it could be more. It also depends on what kind of stocks you pick:

• High-quality, profitable companies can be held with more conviction.

• Riskier, unproven companies with little revenue or profit often require broader diversification.

What really matters is not just numbers, but behavior: how you deal with emotions when markets get rough.

Remember: both diversification and concentration can lead to outperformance. The key is to choose the approach that fits you best — the one that matches your temperament and still lets you sleep well at night.

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That’s it for today.
We’ll see you again in the next edition of our newsletter!

Until then, invest wisely.

Vincent & Stefan
The Future Investors

Disclaimer:
The information and opinions provided in this article are for informational and educational purposes only and should not be considered as investment advice or a recommendation to buy, sell, or hold any financial product, security, or asset. The Future Investors does not provide personalized investment advice and is not a licensed financial advisor. Always do your own research before making any investment decisions and consult with a qualified financial professional before making any investment decisions. Please consult the general disclaimer for more details.

At The Future Investors, we use our Learning articles to share key lessons that help you become a better long-term investor.

One of the most important lessons: timing the market costs you money. In this article, we share why — and the strategy we use instead. Read further to see our full approach and how we apply it step by step.

Markets Are Unpredictable

Markets move up and down all the time. Some periods are driven by fear, others by optimism. Headlines are full of extremes: “biggest drop in years” or “record rally since decades.”

In moments like this, it’s easy to feel uncertain. As investors, we all ask the same questions:

“Should I buy now?”
“Is this the bottom?”
“Should I wait?”
“Should I sell and get back in later?”

The reality is: nobody knows. Short-term moves are unpredictable and often driven by emotions. What feels like the worst time to invest can suddenly turn into the best opportunity.

History shows an important pattern: the best days often follow right after the worst ones. If you’re not invested when that happens, you miss out — and it can cost you a lot.

Source: FMP Wealth Advisers

The costs of timing the market

Let’s say you had invested $10,000 in the S&P 500 between January 2003 and December 2022, and you just left it alone. You would have $64,844.

But if you missed just the 10 best days in that whole 20-year period, you would have only $29,708. That’s less than half.

And get this, 7 of those 10 best days happened during bear markets, when things looked really bad.

If you had missed the 40 best days, your return would actually be negative.

This shows how dangerous it can be to jump in and out of the market. Timing it wrong will costs you money.

There’s a reason investors say:

“Time in the market beats timing the market.”

Source: Visual Capitalist

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Our strategy instead of timing

Since timing the market is so hard (basically impossible), we follow a different plan — one that doesn’t rely on timing the market.

Here’s what we do:

1. We invest in high-quality companies.
These are businesses with strong leadership, durable competitive advantages (moats), steady profits, and long-term potential — companies that can survive a recession and remain essential even during economic weak times.

To identify these businesses, we use our Fundamental Scoring Framework, which rates companies across 19 different factors, from financial strength and profitability to management quality and competitive positioning. This gives us a clear view of a company’s true quality.

In our Unpacked series, we share this framework with you: each month we analyze a company in detail and give it a fundamental score between 0 and 100:

🔴 Below 50 → Uninvestable
🟠 50 - 59 → Questionable
🟡 60 - 69 → Reasonable
🟢 70 - 79 → Quality
🔵 80 - 89 → High-Quality
🟣 90 or above → Exceptional

Curious about our Fundamental Scoring Framework and the companies we’ve rated? Check them out here.

2. At a fair price
When evaluating these companies, we look at their valuations to make sure we're buying at a reasonable price. We focus on multiple key ratios such as the Price-to-Earnings (P/E), Price-to-Sales (P/S) and Price-to-Free-Cash-Flow (P/FCF) ratios compared to their historical averages. We also consider the Price-to-Earnings Growth (PEG) ratio, which adjusts the P/E ratio for the company's expected earnings growth. A lower PEG suggests that a company is more reasonably priced in relation to its future growth prospects.

In addition to valuation multiples, we closely track margin development and growth in revenue, earnings, free cash flow and ROIC (Return on Invested Capital) to ensure the business is not only fairly priced but also strengthening its fundamentals over time. Because a company that is only “cheap” isn’t interesting — it needs to combine an attractive valuation with solid fundamentals and sustainable growth.

3. We use a value averaging down strategy
Once we believe a company is reasonably valued, we apply what we call a Value Averaging Down strategy. Each time the company's price drops more and hits our price targets, we increase our investment. The lower the price, the more we buy. This approach allows us to take advantage of market dips and position ourselves for greater long-term returns.

This also help us to reduce risk by spreading out investments over time, which can avoid the potential downside of investing a large sum at the wrong price.

4. Sometimes we invest more at once.
When prices are really low and the market is undervalued, it can be smart to invest a larger amount at once. Studies from Vanguard show that in around 68% of the cases, investing all at once (lump sum) gives better returns for the long term than spreading it out.

Markets have historically moved upward over time. By investing all at once, you can benefit from that growth earlier and for longer.

As mentioned before: "time in the market beats timing the market." Still, when valuations are high or right before a market correction, spreading your investment can be a smarter move. During the dot-com crash (2000–2003) and the financial crisis (2008–2009), this approach helped reduce immediate losses

For now, since the market seems quite overvalued (especially in the US), we stick with our Value Averaging Down strategy. But if prices drop more and stocks become cheaper, we will invest more aggressively.

Curious to see how we apply this strategy in practice? Take a look at our portfolios 👇.

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Final thoughts

Trying to time the market is like trying to guess the weather months in advance. You might get lucky once, but over time, it usually doesn’t work.

Instead of trying to be perfect, we focus on being consistent and stick to our principles. We invest in strong companies, buy more when valuations become more reasonable, and stay in the market — even when things get scary.

Because the truth is:
🟢 The biggest gains often come right after the biggest drops.
🚫 If you’re not in the market when that happens — it will cost you money!
📈 And the lower the prices go, the higher your potential long-term returns

This is why we believe consistent investing beats trying to time the market. Stay disciplined, focus on quality, and let time do the heavy lifting 💪. We wish you success and confidence on your investment journey!

Thank you for reading! 🙏
We put a lot of love into creating this post for you. If you enjoyed it, feel free to click the ❤️ button so more people can discover it on Substack or hit the ↪️ share button to share it with friends, family and fellow investors!

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Don’t hesitate to share your thoughts in the comments — we’d love to hear from you 💬

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That’s it for today.
We’ll see you again in the next edition of our newsletter!

Until then, invest wisely.

Vincent & Stefan
The Future Investors

Disclaimer:
The information and opinions provided in this article are for informational and educational purposes only and should not be considered as investment advice or a recommendation to buy, sell, or hold any financial product, security, or asset. The Future Investors does not provide personalized investment advice and is not a licensed financial advisor. Always do your own research before making any investment decisions and consult with a qualified financial professional before making any investment decisions. Please consult the general disclaimer for more details.

In investing, it’s good to look at the past, but it’s even more important to look ahead. Yacktman’s Forward Rate of Return (FRR) is a powerful tool that helps investors estimate future returns. This concept was developed by investor Don Yacktman and has become a valuable tool for those seeking a solid long-term investment strategy.

In this article, we will dive deeper into the FRR, explain the formula, provide concrete examples, and discuss the pros and cons of using this method.

💡 What is the Forward Rate of Return?

The Forward Rate of Return (FRR) is a way to estimate what kind of return you can expect from an investment over time. Yacktman defines the FRR as the free cash flow yield, plus the real growth of the company, plus inflation. This method helps investors get a clearer idea of the returns they might see, based on the company’s cash flow and growth, rather than just focusing on market fluctuations. By using the FRR, investors can make better predictions about future returns, considering both the company’s financial situation and broader factors like inflation. This makes it a useful tool for building a more solid investment plan.

🧠 The FRR Formula

The FRR is calculated by combining the following elements:

The Forward Rate of Return = Free Cash Flow Yield + Growth + Inflation

Where:

• Free Cash Flow Yield: The free cash flow yield is calculated by dividing the total free cash flow by the company’s market capitalization.

• Growth: This is the estimated annual free cash flow growth of the company over the next 5 years.

• Inflation: The expected annual inflation rate for the next 5 years.

🔍 Concrete Examples

Let’s now calculate the forward rate of return for the following two companies:

Nvidia
Here are the data for Nvidia (source: koyfin.com):

• Total Free Cash Flow: $72.06B

• Market Capitalization: $4,206.80B

• Estimated FCF Growth over the next 5 years: 28.2%

• Estimated Inflation Rate: 2.4%

FRR = $72.06B / $4,206.80B = 1.7% + 28.2% + 2.4% = 32.3%

This means Nvidia is expected to generate an annual return of 32.3% over the next 5 years, based on its current market capitalization, free cash flow, growth expectations, and inflation estimates.

The Trade Desk
Here are the data for The Trade Desk (source: koyfin.com):

• Total Free Cash Flow: $695.29M

• Market Capitalization: $39.43B

• Estimated FCF Growth over the next 5 years: 8.4%

• Estimated Inflation Rate: 2.4%

FRR = $695.29M / $39.43B = 1.8% + 8.4% + 2.4% = 12.6%

This means The Trade Desk is expected to generate an annual return of 12.6% over the next 5 years, based on its current market capitalization, free cash flow, growth expectations, and inflation estimates.

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✅ Advantages of the FRR

The Forward Rate of Return has several advantages:

• The FRR gives investors a more realistic view of what they can expect from their investment in the long term, based on the company’s cash flow and growth expectations.

• The formula is relatively straightforward to apply, making it accessible for both beginner and experienced investors.

• With the FRR, investors can compare different stocks or markets based on their expected returns, helping them make more informed decisions.

• The FRR helps investors focus on the underlying business fundamentals instead of short-term market fluctuations, which are often difficult to predict.

⚠️ Disadvantages of the FRR

In addition to its advantages, the FRR has some important drawbacks:

• The FRR relies heavily on the accuracy of the growth expectations and free cash flow estimates used. Incorrect or overly optimistic assumptions can lead to misleading predictions. It’s important to remember that the future is uncertain, and changes in market conditions or company strategies can significantly affect actual growth.

• The FRR does not account for market volatility or unforeseen external factors such as economic recessions, geopolitical events, or changes in consumer behavior. These can significantly affect a company’s performance, even if free cash flow and growth projections appear favorable.

• The FRR is partly based on historical performance, which may not always be a reliable indicator for the future, especially in fast-changing industries. What worked in the past isn’t always a guarantee for future results. Innovations or disruptions in the market can quickly make existing business models obsolete.

📌 Conclusion

The Forward Rate of Return is a valuable tool for investors looking to estimate future returns based on a company's financial health and expected macroeconomic conditions. Don Yacktman’s approach helps investors focus on long-term fundamentals rather than short-term market fluctuations. While the FRR can be a useful tool, it is essential to approach it with caution and integrate it into a broader investment strategy. It’s important to use multiple tools and analyses, as market conditions can be unpredictable.

Sources: GuruFocus, Koyfin

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Thank you for reading! 🙏
We put a lot of love into creating this post for you. If you enjoyed it, feel free to click the ❤️ button so more people can discover it on Substack or hit the ↪️ share button to share it with friends, family and fellow investors!

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That’s it for today.
We’ll see you again in the next edition of our newsletter!

Until then, invest wisely.

Vincent & Stefan
The Future Investors

Disclaimer:
The information and opinions provided in this article are for informational and educational purposes only and should not be considered as investment advice or a recommendation to buy, sell, or hold any financial product, security, or asset. The Future Investors does not provide personalized investment advice and is not a licensed financial advisor. Always do your own research before making any investment decisions and consult with a qualified financial professional before making any investment decisions. Please consult the general disclaimer for more details.

In this article, you’ll learn about the different phases that every market goes through, explained in a simple and practical way. It’s not about predicting the future. It’s about recognizing what’s happening, so you can spot opportunities early and avoid costly mistakes. Master the waves, and you master the market.

Markets are like life: full of ups and downs

Stocks, housing, Bitcoin, everything moves in waves. Sometimes it feels like prices will only go up. Other times it feels like markets will never recover. This is completely normal. It’s called a market cycle. If you know what to look for, you won’t be surprised when things change. You don’t need to predict what’s coming next. You just need to recognize which phase we’re in. That’s your big advantage: staying calm when others panic.

Most market cycles go through five phases. Let’s break down the 5 key phases, starting with the 3 phases of a bull market!

Bull Market

Source: DailyFX/IG

1. Discovery

The Discovery Phase is the quiet beginning, when no one is excited yet. People are still thinking about the last crash, but slowly, something new is beginning. It’s the best time to plant the seeds for future gains.

Duration: ⏳ ~25% of the cycle
Key signs:

• Smart investors ("smart money") are the first to buy.

• The trend is just starting, but most people are still scared or not paying attention.

• Accumulation happens quietly behind the scenes.

• Small drops ("shakeouts") scare out weak hands.

• Patience is really important here.

Feeling: Cautious optimism 😌😊
Opportunity: If you invest here, you often buy before the big move up

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2. Momentum

The Momentum Phase is when the market starts to feel better. Prices are rising steadily, more people are paying attention, and optimism is growing.

Duration: ⏳ ~35% of the cycle
Key signs:

• The trend becomes visible.

• Excitement grows, broader participation pushes prices higher.

• Corrections happen but are healthy.

• Sentiment is optimistic but not extreme.

Feeling: Growing confidence and excitement 😁😄
Opportunity: Ride the trend early before the crowd gets too excited.

3. Blow-Off

The Blow-off Phase is when the market gets risky. Excitement takes over, prices jump quickly, everyone tries to get in, and people stop thinking carefully.

Duration: ⏳ ~10% of the cycle
Key signs:

• Everyone is talking about how much money you can make. From your neighbor to your hairdresser. FOMO takes over.

• Prices shoot up fast.

• People stop thinking and just chase gains.

• Many believe "this time is different," ignoring all risks.

• Smart money quietly start selling

Feeling: Euphoria and greed 🤩🤯
Opportunity: Start reducing risk, take some profits, and avoid chasing the crowd.

We covered the 3 bull market phases. Now let's dive into the 2 bear market phases!

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Bear Market

Source: DailyFX/IG

4. Transition

The Transition Phase is when the mood shifts from bullish to bearish. Some people still believe prices will go higher, but growing doubt holds the market back. Buyers and sellers are in a constant push and pull.

Duration: ⏳ ~5% of the cycle
Key signs:

• The market peaks after a strong run.

• A sharp sell-off shakes investor confidence.

• Many still believe it's just a normal correction.

• Lower highs signal that the strength is fading.

• Smart money starts to exit quietly.

Feeling: Uncertainty and denial 😕🤔
Opportunity: Protect your gains, raise cash, and prepare for bigger moves down.

5. Deflation

The Deflation Phase is when fear takes full control. Panic selling drives prices lower, and hope is replaced by fear.

Duration: ⏳ ~25% of the cycle

• Reality sets in after months of denial.

• Fear and panic drive heavy selling.

• Even strong companies and good assets are sold off.

• Dip-buying fails, each small rally gets crushed.

• Media is filled with negative stories and blame games.

• Value investors quietly start stepping back in.

Feeling: Fear and capitulation 😱😭
Opportunity: This is when brave, patient investors can find the best deals.

Know the phase, control the game

Knowing where you are in the cycle can make a big difference in how you invest. It helps you see what most people miss and stops you from making mistakes that cost a lot of money.

When you understand the different phases, you don’t panic when prices fall. You also don’t get too excited when everything is going up. You stay calm, stay patient, and make better choices while others lose control.

It’s not about trying to guess what will happen tomorrow, no one can do that. It’s about looking at the signs and making simple decisions based on what’s happening in the market.

When you see signs of hype, you know it’s time to be careful. When there is fear everywhere, you know it might be time to get interested. Your real advantage is not guessing the future, but staying calm when others are emotional. That’s when the best opportunities come and when you avoid the biggest risks.

As Warren Buffett says:
"Be greedy when others are fearful, and fearful when others are greedy."

And that’s why knowing the cycle gives you the advantage.

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So…where are we right now?

Looking at the markets today, we believe we’re somewhere between the late Momentum Phase and the early stages of a Blow-Off Phase.

After the bear trap in early May, investor confidence has returned. Momentum is building again — major indexes are approaching new highs, big tech is regaining strength, and optimism is rising across the board.

Markets will always move in waves. You can't control it. You can't stop it. But recognizing the cycle and staying calm can make a big difference over time.

Thank you for reading! 🙏
We put a lot of love into creating this post for you. If you enjoyed it, feel free to click the ❤️ button so more people can discover it on Substack or hit the ↪️ share button to share it with friends, family and fellow investors!

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That’s it for today. Stay focused, stay patient, and trust the journey. Wishing you lots of success and confidence as you ride the waves ahead!

We’ll see you again in the next edition of our newsletter!

Until then, invest wisely.

Vincent & Stefan
The Future Investors

Disclaimer:
The information and opinions provided in this article are for informational and educational purposes only and should not be considered as investment advice or a recommendation to buy, sell, or hold any financial product, security, or asset. The Future Investors does not provide personalized investment advice and is not a licensed financial advisor. Always do your own research before making any investment decisions and consult with a qualified financial professional before making any investment decisions. Please consult the general disclaimer for more details.

When looking for good investments, it's important to know if a company is financially healthy. In 2000, accounting professor Joseph Piotroski created the Piotroski F-Score, a system that helps investors separate strong companies from weak ones.

This score looks at nine financial factors and gives each company a score between 0 and 9. A higher score means a company is in better shape, while a lower score could be a warning sign.

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How the Piotroski F-Score works

The F-Score is based on nine simple financial checks, grouped into three categories: profitability, debt and liquidity, and efficiency.

1️⃣ Profitability (3 points)
✔️ Positive Return on Assets (1 point) – The company is making a profit.
✔️ Positive Operating Cash Flow (1 point) – The business is generating real cash from its operations.
✔️ Higher ROA than last year (1 point) – The company’s profits are improving.

These checks show if a company is making money and improving its financial results.

2️⃣ Debt & Liquidity (3 points)
✔️ Operating Cash Flow is higher than net income (1 point) – The company’s cash flow is strong and not just based on accounting numbers.
✔️ Less long-term debt than last year (1 point) – The company is reducing its debt.
✔️ A higher current ratio than last year (1 point) – The company is in a better position to pay short-term bills.

These points help measure if a company is managing its debt well and staying financially stable.

3️⃣ Efficiency & Stability (3 points)
✔️ No new shares issued (1 point) – The company is not diluting existing shareholders.
✔️ Higher gross margin than last year (1 point) – The company is making more money on its sales.
✔️ Higher asset turnover than last year (1 point) – The company is using its assets more efficiently.

A company that scores well here is managing its costs and assets wisely, which is a good sign for long-term success.

What the score means

After checking all nine factors, companies get a total score between 0 and 9:

🚨 0 - 3 (Weak): The company may be struggling financially and could be risky.
⚖️ 4 - 6 (Stable): The company has both strong and weak points but is in decent shape.
✅ 7 - 9 (Strong): The company is financially solid and well-managed.

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Source: F-Ray Financial Technologies

Examples of companies and their scores

Here are real-world examples of companies with weak, stable, and strong Piotroski F-Scores (source: gurufocus.com):

🚨 Weak (0-3) – Companies With Financial Struggles

• MicroStrategy (MSTR) – 2

• Intel (INTC) – 3

These companies may have high debt, low profits, or cash flow problems, making them riskier investments.

⚖️ Stable (4-6) – Companies With Mixed Strengths

• Tesla (TSLA) – 4

• Hims & Hers (HIMS) – 5

• Amazon (AMZN) – 6

These companies have some strong points, but there may be areas of concern investors should look into further.

✅ Strong (7-9) – Companies in Great Financial Shape

• Apple ($AAPL) - 7

• Mastercard ($MA) – 8

• KLA Corporation ($KLAC) – 9

These companies are profitable, manage their finances well, and continue to grow efficiently.

How we use the Piotroski F-Score

At The Future Investors, we use the Piotroski F-Score as part of our research to check a company’s financial strength. While it’s not the only factor we consider, it helps us quickly spot strong businesses and avoid weaker ones.

Do you use the Piotroski F-Score in your investing strategy? Let us know in the comments!

Thank you for reading! 🙏
We put a lot of love into creating this post for you. If you enjoyed it, feel free to click the ❤️ button so more people can discover it on Substack.

Don’t hesitate to share your thoughts in the comments — we’d love to hear from you 💬

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Disclaimer:
The information and opinions provided in this article are for informational and educational purposes only and should not be considered as investment advice or a recommendation to buy, sell, or hold any financial product, security, or asset. The Future Investors does not provide personalized investment advice and is not a licensed financial advisor. Always do your own research before making any investment decisions and consult with a qualified financial professional before making any investment decisions. Please consult the general disclaimer for more details.

It’s Sunday. The markets are closed, and for us, the weekend is a chance to slow down a bit. A moment to relax, and sometimes, that means putting on a good movie or series.

Last night, we finished Succession. What a ride. Sharp dialogue, crazy power games, and just a really well-made show. After watching the final episode, we looked at each other and said: “This one’s going on the list.”

So today, we wanted to share that list with you.

These are our 5 favorite TV series on business and finance — the ones that really stuck with us over the years. Some of them changed the way we think about business and investing. Others were just super entertaining, but still packed with lessons.

If you're into business, investing, or just love a good story with ambition, money, and bold decisions… these are for you.

Let’s dive into it📺.

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1. Billions (2016-2023)

Billions is a drama series with seven seasons that really pulls you into the world of big money and power games. It follows the intense battle between a hedge fund billionaire and a government lawyer, each trying to outsmart the other. What we like about it: it’s sharp, full of twists, and shows how blurred the line can be between right and wrong in the world of finance. You get a front-row seat to the egos, the deals, and the pressure — and it makes you wonder how much of it is fiction… and how much is real.

2. Succession (2018-2023)

Succession is a four-season drama series about a wealthy family that owns a global media empire. When the father (the CEO) starts to step back, his children each try to take the lead, which leads to plenty of drama, power struggles, and surprising twists. What we love about this show: the writing is sharp, the characters are full of personality, and it gives you a peek into a world of power, family dynamics, and ambition. We just finished the final season — and honestly, we didn’t want it to end.

3. Industry (2020- )

Industry is a British drama series about a group of young people starting their first jobs in the world of investment banking in London. They’re eager to prove themselves, but soon discover that the job comes with pressure, long hours, and tough competition. What we like about this series: it’s modern, fast-paced, and shows what it’s really like to work in a high-stress environment when you’re just getting started. It’s about ambition, challenges, and figuring out who you want to be.

4. The Men Who Built America (2012)

The Men Who Built America is a docuseries that tells the story of the powerful businessmen who helped shape modern America — like Rockefeller, Carnegie, Vanderbilt, J.P. Morgan, and Ford. It shows how they built huge industries, took big risks, and changed the country forever.

This one is a must-watch. It shows how America became an economic powerhouse — driven by big ideas, ambition, and innovation. The mix of real history and storytelling makes it both interesting and easy to follow.

5. Silicon Valley (2014-2019)

Silicon Valley is a comedy series about a group of young programmers who try to start their own tech company in California. They come up with a brilliant idea for a new app, but turning that idea into a real business brings a lot of challenges — from dealing with investors to competing with big tech giants.

The show is funny, smart, and full of situations that feel both crazy and believable. It gives you a look at the startup world in a way that’s entertaining, but also surprisingly insightful. A great pick if you're curious about how the tech world works behind the scenes.

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𝗦𝘂𝗺𝗺𝗮𝗿𝘆

1. Billions
2. Succession
3. Industry
4. The Men Who Built America
5. Silicon Valley

These are the series that really stayed with us. Some made us think differently about business, others were just so good we couldn’t stop watching. They’ve inspired us in different ways and we hope they’ll do the same for you.

Have you seen any of them? Or do you have a favorite business or finance series we missed?📺 We’d love to hear it, leave it in the comments below!

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That’s it from us for today. If you’ve got nothing planned tonight, go get comfortable on the couch, turn on the TV, and pick one of these series — you won’t be disappointed!

Enjoy your Sunday,

The Future Investors

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Disclaimer:
The information and opinions provided in this article are for informational and educational purposes only and should not be considered as investment advice or a recommendation to buy, sell, or hold any financial product, security, or asset. The Future Investors does not provide personalized investment advice and is not a licensed financial advisor. Always do your own research before making any investment decisions and consult with a qualified financial professional before making any investment decisions. Please consult the general disclaimer for more details.

When investors talk about returns, the conversation often turns straight to dividends. A stable dividend is seen as a sign of financial health, consistent policy, and shareholder-friendly management. But what many investors overlook is that companies can return value in more ways than just dividends. This brings us to the concept of Shareholder Yield, a framework that reveals how companies return value in a more complete way. Let’s explore what it consists of and why it matters.

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Shareholder yield: The full picture

Shareholder Yield is a broader way to look at how companies return value to their investors. Instead of focusing only on dividends, it includes everything a company does to give money back to shareholders.

There are three key components that make up shareholder yield:

• Dividends – the most visible form of return, where the company pays cash directly to shareholders.

• Share buybacks – when a company buys back its own stock, reducing the number of shares in the market and making each remaining share more valuable.

• Debt reduction – when a company pays off debt, it becomes financially stronger and more stable, which benefits shareholders over the long term.

How to calculate shareholder yield

The formula for calculating shareholder yield is relatively straightforward:

Shareholder yield (%) = Dividend Yield + Share Buyback Yield + Debt Reduction Yield

Let’s break down each component:

• Dividend yield = Annual dividend per share ÷ current share price

• Share buyback yield = (Change in number of shares outstanding compared to last year ÷ current number of shares) × 100

• Debt reduction yield = (Change in net debt compared to last year ÷ market value or enterprise value) × 100

A positive shareholder yield means the company is actively returning capital to shareholders. If one of the components is negative, for example, if the company is issuing new shares or taking on more debt, it will reduce the total yield.

Let’s look at a practical example. Suppose a company has the following profile:

💸 Dividend yield: 2.5%
🔁 Share buyback yield: 3% (the number of shares outstanding has decreased by 3% due to a buyback program)
🏦 Debt reduction yield: 1% (the company has reduced its net debt by 1%)

In this case, the total shareholder yield = 2.5% + 3% + 1% = 6.5%

This means the company is returning a total of 6.5% in value to its shareholders per year, through a combination of dividends, buybacks, and debt reduction. Now let’s take a look at some concrete examples of shareholder yield across a few well-known companies, and how each one returns value in its own way.

Shareholder yield in practice

Apple
Apple is a textbook example of a company that excels in returning capital to shareholders, not through high dividends, but through massive buybacks and disciplined debt management.

💸 Dividend yield: 0.50%
🔁 Buyback yield: 3.48%
🏦 Debt reduction yield: 0.22%

Total shareholder yield: 4.20% (source: koyfin.com)

Apple returns about 4.2% of its market value to shareholders each year. While the dividend is relatively small, the company’s large stock buybacks are the main driver of this strong return. At the same time, Apple is steadily paying down its net debt, which strengthens its financial position over the long term.

While some companies offer a positive shareholder yield, others have a negative one. Let’s highlight an example.

Super Micro Computer
Supermicro is an example of a company with a negative shareholder yield, meaning it’s currently taking in more from shareholders than it’s giving back.

💸 Dividend yield: 0.00%
🔁 Buyback yield: -7.57%
🏦 Debt reduction yield: -7.64%

Total shareholder yield: -15.21% (source: koyfin.com)

Super Micro doesn’t pay a dividend and has been issuing new shares rather than buying them back, which leads to significant shareholder dilution. At the same time, the company has increased its net debt, adding further pressure from a capital return perspective. While this strategy may support aggressive growth, it comes at a cost to existing shareholders in the short term.

Why shareholder yield matters

When you invest in a company, you're not just betting on stock price growth, you're investing in how that company manages its capital. Shareholder yield gives a more complete picture: it combines dividends, share buybacks, and debt reduction to show how much value a company is truly returning to shareholders.

It’s not the only metric that matters, and a high yield alone doesn’t make a company a great investment. But when it’s driven by real, sustainable free cash flow, not financial tricks, it could be a powerful signal. Companies that return capital consistently, using real cash instead of borrowed money, tend to think long term. They’re focused on building value, not just boosting short-term stock prices.

On the flip side, a deeply negative shareholder yield, from issuing more shares or taking on extra debt, means shareholders are giving more than they’re getting. In that case, your return depends entirely on the stock price rising sharply, year after year. Ask yourself: is that realistic?

Understanding shareholder yield helps you set better expectations. It shows whether you’re investing in a company that gives back, or one that constantly needs more to keep going.

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Wrapping up

Investing is about finding value, not just in price movements, but in how a company uses its resources. Shareholder yield helps you look beyond dividends and stock charts to truly understand how a business creates value for its shareholders.

So from now on, ask yourself one simple question:
Is this company truly giving something back to me as a shareholder and how?

Good luck, and invest wisely.

The Future Investors

Thank you for reading! 🙏
We put a lot of love into creating this post for you. If you enjoyed it, feel free to click the ❤️ button so more people can discover it on Substack.

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Disclaimer:
The information and opinions provided in this article are for informational and educational purposes only and should not be considered as investment advice or a recommendation to buy, sell, or hold any financial product, security, or asset. The Future Investors does not provide personalized investment advice and is not a licensed financial advisor. Always do your own research before making any investment decisions and consult with a qualified financial professional before making any investment decisions. Please consult the general disclaimer for more details.

Check out our Top 5 favorite podcasts that every investor should listen to for valuable insights, company breakdowns, and investment advice! 🎙️🎧

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1. Acquired

The Acquired podcast, hosted by Ben Gilbert and David Rosenthal, explores the fascinating stories behind some of the biggest companies in the world. Each episode takes a deep dive into the history, strategies, and key moments that led to their success, offering valuable lessons for entrepreneurs and investors alike. There are episodes on companies like Nike, Visa, Microsoft, and Nvidia, as well as interviews with none other than Charlie Munger and Meta CEO Mark Zuckerberg.

Listen here the episode with TSMC founder Morris Chang:

2. Invest Like The Best

Invest Like the Best is a podcast hosted by Patrick O'Shaughnessy, featuring conversations with the best investors and business leaders in the world. The show dives into their ideas, methods, and personal stories to help you better invest your time and money. With stock market insights and boardroom strategies you won't find anywhere else, this podcast is perfect for professional investors, CEOs, entrepreneurs, and business strategists looking to level up their game.

Listen here the episode with Tobi Lutke, CEO and founder of Shopify:

3. Founders

Founders by David Senra is a podcast that helps you learn from history’s greatest entrepreneurs. Every week, David reads a biography of a famous entrepreneur and distills valuable ideas, strategies, and lessons that you can apply to your own work. The podcast offers in-depth insights into the journeys of successful founders, providing inspiration and practical wisdom for aspiring entrepreneurs.

Listen here what David learned from reading the book The Nvidia Way by Tae Kim:

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4. Business Breakdowns

Business Breakdowns, hosted by Jason Calacanis, is perfect for anyone looking to understand how successful companies operate. Each episode dissects a single business, exploring its origins, business model, financials, and competitive edge. With a focus on key lessons behind each success story, it’s especially valuable for investors looking to gain deeper insights into companies' strategies and long-term success.

Listen here to the episode about Axon Enterprise, the pioneer of the taser who has evolved into a leader in body cams and other law enforcement tools:

5. We Study Billionaires

We Study Billionaires is the largest stock investing podcast in the world, with over 180 million downloads. Hosted by Stig Brodersen, Preston Pysh, William Green, Clay Finck, and Kyle Grieve, the podcast interviews and studies famous financial billionaires like Warren Buffett, Ray Dalio, and Howard Marks. Each episode uncovers their investment strategies and offers practical lessons on how to apply these methods to your own stock market investments.

Listen here to the episode about The Warren Buffett Portfolio, where Kyle Grieve discusses major takeaways, including why concentrated portfolios offer the highest probabilities of outperforming:

Summary

1. Acquired
2. Invest Like The Best
3. Founders
4. Business Breakdowns
5. We Study Billionaires

We’ve shared our 5 favorite podcasts on finance, business, and investing, but what are yours? 🎧 Whether you're into stock market strategies, entrepreneurship, or financial news, we’d love to hear which shows you recommend. Which podcasts are we missing? 🎙️👀

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We put a lot of love into creating this post for you. If you enjoyed it, feel free to click the ❤️ button so more people can discover it on Substack.

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Disclaimer:
The information and opinions provided in this article are for informational and educational purposes only and should not be considered as investment advice or a recommendation to buy, sell, or hold any financial product, security, or asset. The Future Investors does not provide personalized investment advice and is not a licensed financial advisor. Always do your own research before making any investment decisions and consult with a qualified financial professional before making any investment decisions. Please consult the general disclaimer for more details.

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1. Investing for Growth - Terry Smith

In this video, Terry Smith, founder and CEO of Fundsmith, discusses his investment philosophy centered on investing in high-quality companies with sustainable growth. He emphasizes the importance of selecting businesses with high returns on capital employed (ROCE) and consistent cash flows. Smith also highlights the significance of a long-term investment approach and avoiding market timing.

2. Most Iconic Interview Ever - Warren Buffett

This interview offers a glimpse into Warren Buffett's early perspectives on investing and business. He shares insights into his investment philosophy, the importance of understanding businesses before investing, and the value of long-term thinking.

3. 1994 Lecture - Peter Lynch

Peter Lynch, renowned fund manager of the Magellan Fund at Fidelity Investments, shares his investment strategies in this 1994 lecture. He discusses how individual investors can leverage their personal experiences and knowledge to identify investment opportunities, emphasizing the importance of thorough research and understanding of companies.

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4. The Art of Investing - François Rochon

In this presentation, François Rochon, founder of Giverny Capital, discusses his investment approach, which focuses on investing in high-quality companies with enduring competitive advantages. He emphasizes the importance of patience, discipline, and a long-term perspective in achieving investment success.

5. Quality Stocks over Value Investing - Terry Smith

Terry Smith elaborates on his preference for investing in high-quality companies rather than focusing solely on traditional value investing metrics. He argues that companies with high returns on capital and strong cash flows often provide better long-term returns, even if they are not classified as undervalued based on conventional metrics.

𝗦𝘂𝗺𝗺𝗮𝗿𝘆

1. Investing for Growth - Terry Smith
2. Most Iconic Interview Ever - Warren Buffett
3. 1994 Lecture - Peter Lynch
4. The Art of Investing - François Rochon
5. Quality Stocks over Value Investing - Terry Smith

Which YouTube videos about investing have helped you the most? ▶️📈 Let us know in the comments!

Thank you for reading! 🙏
We put a lot of love into creating this post for you. If you enjoyed it, feel free to click the ❤️ button so more people can discover it on Substack.

Don’t hesitate to share your thoughts in the comments — we’d love to hear from you 💬

Leave a comment

Disclaimer:
The information and opinions provided in this article are for informational and educational purposes only and should not be considered as investment advice or a recommendation to buy, sell, or hold any financial product, security, or asset. The Future Investors does not provide personalized investment advice and is not a licensed financial advisor. Always do your own research before making any investment decisions and consult with a qualified financial professional before making any investment decisions. Please consult the general disclaimer for more details.

Documentaries can offer great insights into finance and investing, giving us a deeper look at the people, strategies, and events that shape the market. They break down complex topics, making them easier to understand and helping us learn valuable lessons. From corporate scandals to financial crises, these films provide a unique perspective on the industry.

Here are our Top 5 favorite documentaries on finance and investing! 🏦📈 Which must-see documentaries are we missing? What are your favorites? 🗣️📽️

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1. Inside Job (2010)

Inside Job is a documentary that looks at the causes and effects of the 2008 financial crisis. It shows how greed, corruption, and bad decisions in the financial industry, along with weak rules and poor oversight, caused a global economic collapse. Through interviews with experts and insiders, the film explains how this hurt millions of people, leading to lost jobs, home foreclosures, and financial struggles. It also criticizes the lack of accountability and changes after the crisis, raising concerns about whether the system can prevent another disaster.

2. Dirty Money (2018-2020)

Dirty Money is a Netflix documentary series that explores corruption, greed, and unethical behavior in various industries and organizations. Each episode focuses on a different scandal, uncovering cases of fraud, money laundering, environmental destruction, and financial crimes. Through investigative journalism and interviews with insiders, experts, and those affected, the series reveals the shocking extent of these actions and their devastating impact on individuals, communities, and economies. It also examines the systems and failures that allow such misconduct to continue, raising questions about accountability and justice in global business and finance.

3. Enron: The Smartest Guys in the Room (2005)

Enron: The Smartest Guys in the Room is a documentary about the rise and fall of Enron, one of the biggest corporate scandals in U.S. history. It shows how the company’s leaders lied, cheated, and broke laws to make money, leading to its collapse. The film looks at the damage caused to workers, investors, and the economy, while also questioning how such fraud was allowed to happen.

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4. Madoff: The Monster of Wall Street (2023)

Madoff: The Monster of Wall Street is a documentary that explores the rise and fall of Bernie Madoff, who ran the biggest Ponzi scheme in history. It shows how Madoff deceived investors for decades, promising high returns while secretly stealing billions of dollars. Through interviews with victims, experts, and those involved, the film reveals how Madoff’s fraud affected thousands of lives and shook the financial world. It also examines the failure of regulators and others who allowed the scheme to go on for so long.

5. Betting on Zero (2016)

Betting on Zero is a documentary that investigates the controversial story of Herbalife, a global nutrition company accused of being a pyramid scheme. The film follows hedge fund manager Bill Ackman, who bet against the company, claiming it was a fraud. Through interviews with investors, experts, and former employees, it explores the debate over whether Herbalife is a legitimate business or an exploitative scam. It also looks at the impact on its members, who invested their money, and the battle between Ackman and the company’s defenders.

𝗦𝘂𝗺𝗺𝗮𝗿𝘆

1. Inside Job
2. Dirty Money
3. Enron: The Smartest Guys in the Room
4. Madoff: The Monster of Wall Street
5. Betting on Zero

These documentaries offer unique insights into the dark side of business and finance, making them a must-watch for anyone interested in the industry. What are your favorite finance or investing documentaries? 🏦📈

Thank you for reading! 🙏
We put a lot of love into creating this post for you. If you enjoyed it, feel free to click the ❤️ button so more people can discover it on Substack.

Don’t hesitate to share your thoughts in the comments — we’d love to hear from you 💬

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Disclaimer:
The information and opinions provided in this article are for informational and educational purposes only and should not be considered as investment advice or a recommendation to buy, sell, or hold any financial product, security, or asset. The Future Investors does not provide personalized investment advice and is not a licensed financial advisor. Always do your own research before making any investment decisions and consult with a qualified financial professional before making any investment decisions. Please consult the general disclaimer for more details.

Do you understand the path from revenue to free cash flow? 👀🐑

Here’s a complete guide covering everything you need to know, from revenue to free cash flow:

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1. Revenue
This is the total amount of money a company earns from its normal business operations, such as selling products or services.

Revenue = number of units sold x average price per unit

2. Gross Profit
The profit a company makes after deducting the Cost of Goods Sold (COGS) from its revenue. Its the profitability of the company's core business operations, excluding overhead costs, taxes, interest, and other expenses.

Gross Profit = Revenue - COGS

3. Operating Income (EBIT)
EBIT (Earnings Before Interest and Taxes) represents the company’s profit from operations before considering non-operating expenses like interest and taxes.

Operating Income (EBIT) = Gross Profit - Operating Expenses

4. EBITDA
A measure of a company’s profitability that excludes interest, taxes, and non-cash expenses like depreciation and amortization.

EBITDA = Operating Income + Depreciation + Amortization

5. Adjusted EBITDA
Adjusted EBITDA further adjusts EBITDA to exclude non-recurring or irregular expenses (e.g., restructuring costs, litigation costs, or one-time gains).

Adjusted EBITDA = EBITDA ± Adjustments for Non-Recurring Items

6. Pre-tax Income
Pre-tax income is the income a company earns before income taxes. It reflects the profit remaining after all operating and interest expenses have been deducted from revenue.

Pre-Tax Income = Operating Income (EBIT) − Interest Expense

7. Net Income
Net income is the total profit of a company after deducting all expenses, including operating costs, interest, taxes, and non-recurring items, from total revenue.

8. Operating Cash Flow
Operating cash flow is the cash generated from a company’s core business operations. It indicates the company's ability to produce cash to fund operations and pay debts.

Operating Cash Flow = Net Income ± Changes in Working Capital

9. Free Cash Flow
Free cash flow is the cash a company generates after capital expenditures, representing funds available for shareholder distribution, debt repayment, and reinvestment.

Free Cash Flow = Operating Cash Flow - Capital Expenditures

Summary

1. Revenue
2. Gross Profit = Revenue - COGS
3. Operating Income (EBIT) = Gross Profit - Operating Expenses
4. EBITDA = Operating Income + Depreciation + Amortization
5. Adjusted EBITDA = EBITDA ± Adjustments for Non-Recurring Items
6. Pre-Tax Income = EBIT - Interest Expense
7. Net Income = Pre-Tax Income - Taxes
8. Operating Cash Flow = Net Income ± Changes in Working Capital
9. Free Cash Flow = Operating Cash Flow - CapEx

Thank you for reading! 🙏
We put a lot of love into creating this post for you. If you enjoyed it, feel free to click the ❤️ button so more people can discover it on Substack.

Don’t hesitate to share your thoughts in the comments — we’d love to hear from you 💬

Leave a comment

Disclaimer:
The information and opinions provided in this article are for informational and educational purposes only and should not be considered as investment advice or a recommendation to buy, sell, or hold any financial product, security, or asset. The Future Investors does not provide personalized investment advice and is not a licensed financial advisor. Always do your own research before making any investment decisions and consult with a qualified financial professional before making any investment decisions. Please consult the general disclaimer for more details.