Investing is hard

Have you ever noticed the contradictions in our “wisest” investment slogans?

Is it…

“Let your winners run” or “Little pigs get big, but big pigs get slaughtered”?

“Cut your losers short” or “Time in the market beats timing the market”?

“Be greedy when others are fearful” or “Never catch a falling knife”?

“Stick to your investment plan” or “When the facts change, I change my mind”?

There will always be an investment maxim that, in hindsight, will have been the “wise” path you should have taken (usually quoted to you by a 23-year-old, wet-behind-the-ears recent hire at a brokerage firm).

You know that stock you sold when it fell 20%, triggering your stop-loss?

When it reverses and turns into a 300% winner, you should have known that…

“The stock market is designed to transfer money from the active to the patient,” as Warren Buffett once said.

But when you hold onto that other 20% loser in your portfolio – only for it to collapse 85% and never recover – you should have known that…

“Selling your winners and holding your losers is like cutting the flowers and watering the weeds,” as Warren Buffett once wrote.

(Technically, this comes from Peter Lynch, but Buffett liked the quote so much that he included it in one of his year-end reports to shareholders.)

Bottom line: Investing is hard.

[email from InvestorPlace Digest]

more from the same article...

About a decade ago, the research shop Longboard studied the total lifetime returns for individual U.S. stocks from 1983 through 2006.

They found that the worst-performing 6,000 stocks – which represented 75% of the stock-universe in the study – collectively had a total return of… 0%.

The best-performing 2,000 stocks – the remaining 25% – accounted for all the gains.

Here’s Longboard on the takeaway:

The conclusion is that if an investor was somehow unlucky enough to miss the 25% most profitable stocks and instead invested in the other 75% his/her total gain from 1983 to 2006 would have been 0%.

In other words, a minority of stocks are responsible for the majority of the market’s gains.

[then they go into their salespitch of course]