Heartwarming Childhood Memories of Sardinia
In 1932, the acclaimed Italian author Elio Vittorini took part in a remarkable literary excursion to Sardinia, organized by a prominent Italian magazine. The purpose was to award a prize for the best travelogue on the island. From this experience emerged a slender, charming volume published a few years later under the title, “Sardinia Like Childhood,” a poignant account of rediscovering the authenticity of life. It was born from a profound desire for living and the wisdom acquired through encounters with the natural beauty, communities, people, and traditions of Sardinia.
Sardinia is not just an island but a metaphorical continent, transformed into a state of mind within the pages of this book. Examining its history, the profound influence of the megalithic culture, defined by monoliths, dolmens, ancient temples for cleansing rituals, and numerous Nuragic towers, is more pronounced than the historical developments. The island is adorned with Romanesque churches from the medieval period and Gothic Catalan works from the fifteenth and sixteenth centuries. An archaeological site, a village, or a parish church serves as a gateway to an extraordinary journey through time, measured in millennia. It offers a unique and awe-inspiring order of magnitude.
A Comprehensive Outlook on Total Return
In daily life, our time span generally covers months, years, and occasionally decades. However, in the realm of stock and bond funds, the most significant time unit is often a decade. Total Return values summarize the last ten years of a fund’s operation, providing a comprehensive overview of its performance.
Total Return signifies the actual rate of return for an investment over a specific evaluation period, typically one, three, five, or ten years. A longer evaluation period enhances the reliability of the performance assessment. For Closed-End Funds, the Total Return on Net Asset Value is calculated based on the sum of distributions plus the change in the NAV of the fund, whether positive or negative, over a given time frame.
Thus, Total Return encompasses capital appreciation along with the receipt of distributions, which are reinvested on the day of payment. It is a mechanism that facilitates an increase in total return through compound interest. However, investment decisions often involve factors beyond the technical aspects. Many investors utilize dividends or distributions as an additional source of income, altering the perspective on Total Return.
Living off dividends and distributions often entails making dividend reinvestment a discretionary choice. Opting for securities that provide a constant cash flow, with an increase in the initial capital value, should be the primary goal. The Occam’s razor principle advocates for favoring the simplest solution: investing in winning securities over losing ones.
The Power of Inversion in Investment
The inversion rule is a simple yet potent mental model, albeit seldom utilized due to its counterintuitive nature. Instead of pondering the actions required to achieve a goal, it is often simpler to start by inverting the problem. In the context of investment, negative screening—excluding securities with unsuitable characteristics—helps identify winning securities that meet specific requirements.
Having a clear understanding of the pitfalls to be avoided is crucial in portfolio construction. Being cautious of securities with a constantly declining Net Asset Value is essential. Opting for more effective securities that not only pay dividends but have also exhibited growth over time adds significant value. While past performance cannot predict future outcomes, it is vital to assess the historical track record of prospective securities.
Luck may impact short-term results, but a security’s performance over a more extensive period reflects the quality of decision-making processes by its managers. Thus, studying the track record of potential securities is imperative to exclude those that have not demonstrated income and capital growth characteristics in the past.
