Saturday, November 17, 2012

Truths about investing

Morgan Housel lists 50 of them.  Here are a few:

1. Saying "I'll be greedy when others are fearful" is much easier than actually doing it.

3. Markets go through at least one big pullback every year, and one massive one every decade. Get used to it. It's just what they do.

4. There is virtually no accountability in the financial pundit arena. People who have been wrong about everything for years still draw crowds.

5. As Erik Falkenstein says: "In expert tennis, 80% of the points are won, while in amateur tennis, 80% are lost. The same is true for wrestling, chess, and investing: Beginners should focus on avoiding mistakes, experts on making great moves."

12. The analyst who talks about his mistakes is the guy you want to listen to. Avoid the guy who doesn't -- his are much bigger.

20. The market doesn't care how much you paid for a stock. Or your house. Or what you think is a "fair" price.

32. The best investors in the world have more of an edge in psychology than in finance.

34. For most, finding ways to save more money is more important than finding great investments.

35. If you have credit card debt and are thinking about investing in anything, stop. You will never beat 30% annual interest.

39. Twelve years ago General Motors (NYSE: GM  ) was on top of the world and Apple (Nasdaq: AAPL  ) was laughed at. A similar shift will occur over the next decade, but no one knows to what companies.

47. And what Marty Whitman says about information: "Rarely do more than three or four variables really count. Everything else is noise."

50. The most boring companies -- toothpaste, food, bolts -- can make some of the best long-term investments. The most innovative, some of the worst.

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