Here are some things I believe about investing.
1. I believe simple beats complex. The problem is simple is much harder to implement because complex will always sound more intelligent and appealing.
2. I believe the timing of buy or sell decisions matters less than your holding period. Picking tops and bottoms is for the lucky and the liars. Patiently holding onto your investments is more important for most investors than timing.
3. I believe you should ignore what billionaires and legendary investors think about the markets. These people don’t share your circumstances, time horizon or risk profile. Why should you take investing advice from them?
4. I believe self-control can make you far more money than just about any other trait as an investor. I know plenty of high IQ people who are terrible investors because they don’t have the right temperament.
5. I believe every investor in risk assets should be comfortable seeing their money incinerated on occasion. During bear markets and corrections some of your money simply vanishes. That’s just part of investing.
6. I believe being bullish or bearish matters less than progress towards your goals. Your personal financial circumstances should dictate how you invest far more than what you think will happen in the markets. You don’t need to have an opinion on whether markets are going higher or lower in the short-run.
7. I believe risk management is important but you have to take risk to make money. Managing risk is a major component of portfolio management but you can’t avoid risk altogether. You have to invest in something.
8. I believe process is more important than outcomes but at some point performance matters. A successful investment process requires making good decisions over and over again. But you have to understand the difference between discipline and delusion if your process isn’t working.
9. I believe a good strategy you can stick with is vastly superior to a great one you can’t stick with. Perfect is often the enemy of good when it comes to investment behavior.
10. I believe it’s basically impossible to forecast the economy. Even the Fed can’t figure out the path of interest rates, inflation and economic growth and it’s part of their job. If we’re being honest, no one truly understands how the economy works.
11. I believe it’s much easier to explain what just happened than predict what will happen next. The only constants in finance are human nature and moving the goalposts when you’re wrong. Pundits are very good at telling you why something unexpected was obvious in hindsight even when all of their predictions about the future have been wrong.
12. I believe defining what you won’t invest in is more important than what you will invest in. Investors have never had it better but the paradox of choice can be paralyzing. You can find liberation by limiting yourself to certain types of investments and ignoring everything else.
13. I believe there are many different paths to being a successful investor but only a handful of ways to fail. There is no one-size-fits-all when it comes to investing the right way. But unsuccessful investors typically exhibit the same poor investment behavior — market timing, overtrading, trying to outsmart the market, being overconfident in your investment abilities, investing based on political beliefs, etc.
14. I believe markets are right most of the time but not all the time. Markets are kind of, sort of efficient. But just because markets can be crazy at times doesn’t mean it’s easy to beat them.
15. I believe fighting the last war can get you into trouble. The next risk is rarely like the last risk.
16. I believe every investor has their own behavioral blindspots. Knowing yourself is more important than worrying about what other investors are up to.
17. I believe a long time horizon is the ultimate equalizer in the markets. A long enough time horizon is the best hedge against most market risks.
18. I believe useful investment advice is nearly impossible to accept during booms and busts. No one wants to hear about being responsible during a rip-roaring bull market just like no one wants to hear about the virtues of buy and hold during a soul-crushing bear market.
19. I believe long-term returns are the only ones that matter but you have to survive the short-term. As Daniel Kahneman once said, “The long-term is not where life is lived.”
20. I believe most disagreements about markets come down to differences in time horizon and risk tolerance. Markets are full of people with different goals, opinions, time horizons and appetite for risk. That’s what makes a market. It’s also what causes arguments and why there is always a buyer for every seller.
21. I believe nothing about investing is ever easy, but we still make it harder than it has to be. There are no points awarded for the degree of difficulty when it comes to making money in the markets.
22. I believe optimists are better investors than pessimists. They say hope is not an investment strategy, but it kind of is in a way. If you don’t think things will be better in the future than they are today, what’s the point of investing in the first place?
23. I believe doing nothing is the best investment decision most of the time. As long as you have a plan in place, doing nothing is perfectly rational investment behavior.
24. I believe it’s OK to build wealth slowly. Someone once asked Jeff Bezos the best advice he ever received from Warren Buffett. Bezos asked Buffett if his investment ideas are so simple and he’s so rich why doesn’t everyone copy him?
To which Buffett replied, “Because nobody wants to get rich slow.”
None of us are going to be the next Buffett but this idea is more realistic than assuming you can get rich overnight.
