24 Things I Believe About Investing
Source: Ben Carlson
1. I believe simplicity is better than complexity. Questions are simple but difficult to implement because complex ones always sound smarter and more attractive.
2. I believe the timing of a buy or sell decision is more important than the holding period. Picking tops and bottoms is a matter for the lucky and the liar. For most investors, holding on to your investments patiently is more important than timing.
3. I think you should ignore what billionaires and legendary investors say about the market. These people will not analyze your situation, time frame or risk profile. Why should you listen to their investment advice?
4. I believe that self-control will make you more money as an investor than any other trait. I know a lot of highly intelligent people who are terrible investors because they don't have the right temperament.
5. I believe that every investor in risk assets should be happy to see their money get burned once in a while. During bear markets and corrections, some of your money disappears. This is just part of the investment.
6. I believe being bullish or bearish is more important than progress towards your goals. Your personal financial situation is far more important in determining how you invest than what you think will happen in the market. You don't need to have an opinion on whether the market will go higher or lower in the short term.
7. I believe risk management is important, but you have to take risks to make money. Managing risk is an important part of portfolio management, but you can't completely avoid risk. You have to invest in something.
8. I believe that process is more important than results, but at some point performance is also important. A successful investing process requires making the right decisions over and over again. But if your process isn't working, you have to understand the difference between discipline and delusion.
9. I believe that a good strategy that you can stick to is much better than a good strategy that you can’t stick to. When it comes to investing, perfect is often the enemy of good.
10. I think predicting the economy is basically impossible. Even the Fed can't figure out the path of interest rates, inflation and economic growth, which is part of their job. Let’s be honest, no one really understands how the economy works.
11. I believe it is much easier to explain what just happened than to predict what will happen next. The only constant in finance is human nature and changing goals when you make a mistake. Experts are very good at telling you why the unexpected is obvious in hindsight, even if all their predictions about the future were wrong.
12. I think it’s more important to be clear about what you won’t invest in than what you will invest in. Things have never been better for investors, 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 ways to be a successful investor, but only a few ways to fail. There is no one-size-fits-all approach when it comes to the right way to invest. But unsuccessful investors often exhibit the same poor investing behaviors—market timing, overtrading, trying to outsmart the market, overconfidence in their own investing abilities, investing based on political beliefs, etc.
14. I believe the market is right most of the time, but not always. Markets are efficient. But just because markets can be crazy sometimes, that doesn't mean beating them is easy.
15. I believe fighting the last war will bring you trouble. The next risk rarely looks like the last.
16. I believe every investor has his or her own behavioral blind spots. It's more important to know yourself than to worry about what other investors are doing.
17. I believe long-term investing is the ultimate equalizer of the market. A long enough time horizon is the best hedge against most market risks.
18. I believe it is nearly impossible to receive useful investment advice during booms and busts. No one wants to hear about the liabilities of a raging bull market, just like no one wants to hear about the merits of buying and holding in a heartbreaking bear market.
19. I believe long term returns are the only thing that matters, but you have to survive in the short term. As Daniel Kahneman once said: "The long term does not mean life."
20. I think most disagreements about markets come down to differences in time horizons and risk tolerance. The market is filled with people with different goals, perspectives, time horizons, and risk appetites. This is how the market is formed. This is also a cause for debate and why for every seller there is always a buyer.
21. I believe investing has never been easy, but we still make it more difficult than it should be. When it comes to making money, there are no points awarded based on difficulty. 22. I believe that optimists make better investors than pessimists. They say hope is not an investment strategy, but in a way it is. What's the point of investing if you don't think things will be better in the future than they are now?
23. I believe doing nothing is the best investment decision most of the time. As long as you have a plan, doing nothing is a completely rational investment behavior.
24. I believe it’s okay to build wealth slowly. Jeff Bezos was once asked what the best advice he had ever received from Warren Buffett was. Bezos asked Buffett, if his investment philosophy is so simple and he is so rich, why doesn't everyone follow his example?
To which Buffett replied: "Because no one wants to get rich slowly."
None of us will be the next Buffett, but the idea is more realistic than assuming you can get rich overnight.
Source: Ben Carlson
1. I believe simplicity is better than complexity. Questions are simple but difficult to implement because complex ones always sound smarter and more attractive.
2. I believe the timing of a buy or sell decision is more important than the holding period. Picking tops and bottoms is a matter for the lucky and the liar. For most investors, holding on to your investments patiently is more important than timing.
3. I think you should ignore what billionaires and legendary investors say about the market. These people will not analyze your situation, time frame or risk profile. Why should you listen to their investment advice?
4. I believe that self-control will make you more money as an investor than any other trait. I know a lot of highly intelligent people who are terrible investors because they don't have the right temperament.
5. I believe that every investor in risk assets should be happy to see their money get burned once in a while. During bear markets and corrections, some of your money disappears. This is just part of the investment.
6. I believe being bullish or bearish is more important than progress towards your goals. Your personal financial situation is far more important in determining how you invest than what you think will happen in the market. You don't need to have an opinion on whether the market will go higher or lower in the short term.
7. I believe risk management is important, but you have to take risks to make money. Managing risk is an important part of portfolio management, but you can't completely avoid risk. You have to invest in something.
8. I believe that process is more important than results, but at some point performance is also important. A successful investing process requires making the right decisions over and over again. But if your process isn't working, you have to understand the difference between discipline and delusion.
9. I believe that a good strategy that you can stick to is much better than a good strategy that you can’t stick to. When it comes to investing, perfect is often the enemy of good.
10. I think predicting the economy is basically impossible. Even the Fed can't figure out the path of interest rates, inflation and economic growth, which is part of their job. Let’s be honest, no one really understands how the economy works.
11. I believe it is much easier to explain what just happened than to predict what will happen next. The only constant in finance is human nature and changing goals when you make a mistake. Experts are very good at telling you why the unexpected is obvious in hindsight, even if all their predictions about the future were wrong.
12. I think it’s more important to be clear about what you won’t invest in than what you will invest in. Things have never been better for investors, 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 ways to be a successful investor, but only a few ways to fail. There is no one-size-fits-all approach when it comes to the right way to invest. But unsuccessful investors often exhibit the same poor investing behaviors—market timing, overtrading, trying to outsmart the market, overconfidence in their own investing abilities, investing based on political beliefs, etc.
14. I believe the market is right most of the time, but not always. Markets are efficient. But just because markets can be crazy sometimes, that doesn't mean beating them is easy.
15. I believe fighting the last war will bring you trouble. The next risk rarely looks like the last.
16. I believe every investor has his or her own behavioral blind spots. It's more important to know yourself than to worry about what other investors are doing.
17. I believe long-term investing is the ultimate equalizer of the market. A long enough time horizon is the best hedge against most market risks.
18. I believe it is nearly impossible to receive useful investment advice during booms and busts. No one wants to hear about the liabilities of a raging bull market, just like no one wants to hear about the merits of buying and holding in a heartbreaking bear market.
19. I believe long term returns are the only thing that matters, but you have to survive in the short term. As Daniel Kahneman once said: "The long term does not mean life."
20. I think most disagreements about markets come down to differences in time horizons and risk tolerance. The market is filled with people with different goals, perspectives, time horizons, and risk appetites. This is how the market is formed. This is also a cause for debate and why for every seller there is always a buyer.
21. I believe investing has never been easy, but we still make it more difficult than it should be. When it comes to making money, there are no points awarded based on difficulty. 22. I believe that optimists make better investors than pessimists. They say hope is not an investment strategy, but in a way it is. What's the point of investing if you don't think things will be better in the future than they are now?
23. I believe doing nothing is the best investment decision most of the time. As long as you have a plan, doing nothing is a completely rational investment behavior.
24. I believe it’s okay to build wealth slowly. Jeff Bezos was once asked what the best advice he had ever received from Warren Buffett was. Bezos asked Buffett, if his investment philosophy is so simple and he is so rich, why doesn't everyone follow his example?
To which Buffett replied: "Because no one wants to get rich slowly."
None of us will be the next Buffett, but the idea is more realistic than assuming you can get rich overnight.