Little white lies are told by humans all the time. Indeed, lying is often how we get through each day in a happy little bubble. We spend time and energy rationalizing our own behaviors, beliefs and decision-making processes.
Owning a variety of asset classes means that some part of your portfolio will be doing well when the cyclical turmoil arises. A broadly diversified portfolio includes large capitalization stocks, small cap, emerging markets, fixed income, real estate and commodities.
The beauty of diversification is it's about as close as you can get to a free lunch in investing.
You can blow on the dice all you want, but whether they come up 'seven' is still a function of random luck.
When it comes to investing, there is no such thing as a one-size-fits-all portfolio.
Never forget this simple truism: Forecasting is marketing, plain and simple.
Commissions add up, taxes are a big drag, margin ain't cheap. A good accountant costs money as well. The math on this one is obvious, yet investors often fail to recognize it: Keep your costs low and your turnover lower, and you will win in the end.
Asset managers have different approaches, and I don't wish to suggest there is only one way to run money. There are many ways one can attempt to reduce risk, improve performance, lower drawdowns and reduce volatility.
Indeed, eventually, random outcomes all revert to the mean, meaning that streaks eventually end. Understanding this is a key part of intelligent and rational investing.
People who work in specialized fields seem to have their own language. Practitioners develop a shorthand to communicate among themselves. The jargon can almost sound like a foreign language.
If you are not making any mistakes, you are being excessively risk-averse. Investing involves risk, and that means you will occasionally be wrong. And although it is okay to be wrong, it is not okay to stay wrong.
The data strongly suggest that very good years in the U.S. stock market are followed by more good years.
Whenever I see a forecast written out to two decimal places, I cannot help but wonder if there is a misunderstanding of the limitations of the data, and an illusion of precision.
Much of the traditional thinking about cash is well intentioned but unrealistic. Should you have six months of living expenses in the bank for emergencies? Sure. Do you? Probably not.
Markets are frequently ahead of, and often out of sync with, the economy.
Active management leads to lots of poor investor behavior. It sends people chasing after whoever has the hot hand at the moment.
Yearly data put the rest of the noise into perspective. Most of the weekly or monthly random up-and-down movements get smoothed out. Ultimately, this is where long-term investors should be focused.
There is a shortage of doctors, and the American Medical Association is aiming to keep it that way.
Have a well-thought financial plan that is not dependent upon correctly guessing what will happen in the future.
No one knows what the top-performing asset class will be next year. Lacking this prescience, your next-best solution is to own all of the classes and rebalance regularly.
