With the market hitting a new high almost weekly it was refreshing to see an article that I originally found in the Saturday edition of the WSJ (although it looks like it was reprinted with permission). The article titled, “Sweet 16: Rules for Investors” by Morgan Housel reminds us of some fundamental truths during this major bull run we have been on for the past five years.
- All past market crashes are viewed as opportunities, but all future market crashes are viewed as risks
Everyone is a genius in hindsight. I want to talk to the guy who got out of the market in 2000 and the housing market in 2007!
- Most bubbles began with a rational idea that gets taken to an irrational extreme
Mr. Housel used the dot com era as an example, but I like the housing example. Property generally tends to increase over time but that got taken to an extreme
- “I don’t know” are three of the most under used words in investing.
So true! and CNBC doesn’t exactly help since everyone on there is an “expert” with often differing opinions.
- Short term thinking is at the root of most investing problems
- Investing is overwhelmingly a game of psychology
- Things change quickly and more drastically than many think
- Three of the most important variables to consider are the valuations of stocks when you buy them, the length of time you can stay invested and the fees you pay to brokers and money managers
- There are no points awarded for difficulty
- A couple of times per decade, investors forget that recessions happen a couple of times per decade
Feels like this time might be different (I know that is cliche statement). It really feels like people have learned their lesson, and it isn’t hard to find an article about millennials not investing appropriately b/c they do remember.
- Don’t check your brokerage account once a day and your blood pressure only once a year
- You should pay the most attention to the investor who talks about his or her mistakes
- Change your mind when the facts change
- Read past stock-market predictions and you take current predictions less seriously
My dad is a ridiculous pack rat. Ridiculous. Often in his basement I’ll find an older magazine from the late 90s or early 2000s – the headlines are amazing!
- There is no such thing as a normal economy or a normal stock market
This line is what made me want to share the article! What is normal literally can’t be answered. Every decade is made up of *something* which controls the headlines, the businesses that are operating, etc
- It can be difficult to tell the difference between luck and skill in investing
Last year my investment club beat the market by a couple percentage points. Was it luck that we invested in the hot industries? or was it skill to know that we got in? It was luck, but was it skill that we got out at the right time? I believe so.
- You are only diversified if some of your investments are performing worse than others