Probably the most popular insight to make its way from finance theory into everyday usage is that "diversification is the only free lunch" in investing. The idea dates back to Harry Markowitz in 1952. He, and those building on his work, demonstrated that in an efficient market, investors shouldn't earn extra return for bearing company-specific risks that can be diversified away.

Buybacks raise important questions. Foremost amongst them are whether, and how much, buybacks push up stock prices, and whether they create other distortions relevant to investors and public finances. This article explores these questions by drawing on economic theory and broadly held views of real-world investor behavior.

We steer our financial course through life, choosing how much to spend and how to invest what’s left, periodically updating our choices as circumstances evolve. This is the essence of financial planning: specifying in advance a desired spending and investment policy conditional on relevant aspects of our life, varying investment opportunities, and our preferences for the benefits derived from our wealth.