When it comes to investing, you are your own worst enemy.
History shows us that people are terrible about guessing what is going to happen - next week, next month, and especially next year.
Any Wall Street advertising that does not go into the boring details of methodology is most likely to be pushing past performance.
You, your employer and your plan's investment managers fail to follow even the most basic rules of investing. You overtrade, chase performance, do not think long term. All of you - All Of You - have done a horrible job managing your retirement plans.
It is important for investors to understand what they do and don't know. Learn to recognize that you cannot possibly know what is going to happen in the future, and any investment plan that is dependent on accurately forecasting where markets will be next year is doomed to failure.
The way we finance homes in this country is slow, filled with middlemen, who run a nonstandardized evaluation process. This makes financing a home cumbersome and difficult.
Investors tend to discover 'hot' mutual fund managers just after a successful run and just before the inescapable force of mean reversion is about to kick in.
How are the cabs in your city? In Manhattan, where I work, they are rather awful.
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.
History is replete with examples of tech firms that were marginalized by new companies and technologies.
Often, investors will discover a manager after he's had a terrific run, usually when he lands on a magazine cover somewhere. Invariably, funds swell up with new investor money just before they revert to their long-term averages.
Most of Google's home technologies have failed to catch on in a major way.
What you pay for an investment is the single biggest determinant for how successful that investment will be. When equity prices are high, your returns will be lower. When they are cheap, your returns will be higher.
Whenever you hear a discussion about the short-term swings in any given stock's price, your immediate thought should be whether it matters to why you are investing.
A hedge fund manager whose clients demand monthly performance reports has different needs than any individual investors with a 20-year time horizon. The needs of that long-term investor differ markedly from someone who is retiring in three years.
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.
As investors, we want to believe we are smart, insightful and uniquely talented - even though we often fail to do the heavy lifting, put in the long hours, and make the uncomfortable but necessary decisions to achieve success.
In social media, people cannot build big followings organically unless what they are putting out to the world has value.
Outcome is simply the final score: Who won the game; what numbers came up in a roll of the dice; how high did a stock go. Outcome is the result, regardless of the method used to achieve it. It is not controllable.
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.
In the investment business, you must expect to be wrong.
Good investors must learn to contextualize the daily background noise.
A number of bloggers in economics and the financial sector have risen to prominence through the sheer strength of their work. Note it was not their family connections nor ties to Ivy League schools or elite banks, but rather the strength of their research, analysis and writing.
'Returnless risk' is not how you prepare for a decent retirement.
The consumption and production of energy is a major component of the global economy.
We love a tale of heroes and villains and conflicts requiring a neat resolution.
You want less of the annoying nonsense that interferes with your portfolios and more of the significant data that allow you to become a less distracted, more purposeful investor.
If you have read me for any length of time, you know I am less than enthralled with much of what passes for financial news.
The data strongly suggest that very good years in the U.S. stock market are followed by more good years.
Truth be told, most financial television bores me. Two or more people discussing the latest economic trends or hot stocks is not especially entertaining.
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.
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.
Gains in corporate profits depend in large part on accelerating global economic growth.
I credit Google for having the foresight to identify threats to its main business of selling advertising against search results. The potential loss of market share in the mobile space led them to the Android acquisition.
The bottom line is this: Cash, in modest increments, has a role in any portfolio. But unless you are Warren Buffett, you should limit it to 2 or 3 percent.
The beauty of diversification is it's about as close as you can get to a free lunch in investing.
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.
Active management leads to lots of poor investor behavior. It sends people chasing after whoever has the hot hand at the moment.
Whenever you try to pick market tops and bottoms, you are making a prediction. Guessing what stock is going to outperform the market is forecasting, as is selling a stock for no apparent reason. Indeed, nearly all capital decisions made by most people are unconscious predictions.
If I am going to trash others for their dumb predictions, I must at least hold myself to the same sort of accountability.
Most of the time, economic data is fairly benign. I don't wish to imply it is meaningless, but it is not a driver of stock markets. Indeed, the correlation between economic noise and how equity markets perform has been wildly overemphasized.
Salesmen always need something to sell.
Investing is about making probabilistic decisions with limited information about an unknowable future. The variables are well known, as are the possible outcomes.
The simple reality of life is that everyone is wrong on a regular basis. By confronting these inevitable errors, you allow yourself to make corrections before it is too late.
Forecasting is simply not a strength of the species; we are much better with tools and narrative storytelling.
The good news is that economists are intelligent, engaging and often charming folks. The bad news is their work is often of little use to investors.
Amongst the financial Twitterati, the term 'muppets' has come to describe any client used and abused by some financial predator. I've adopted the term to describe portfolios that have been assembled for purposes other than serving the clients' best interests.
Once you research an idea, you begin to develop a perspective. Writing about anything in public, often in real time, has helped fashion my views.
Any time you speak to people about their posture, you learn about their most recent investment activity. When someone just bought stocks, they tend to be bullish; someone who just sold is bearish.
