Investment Principles to Live By
Top 5 of the Week of November 19th
Kicking off our Top 5 this week, Mullooly Asset Management, Inc.’s Timothy Mullooly explains why we should all have a 4-year old’s mindset. For Bps and Pieces, Phil Huber shares the ultimate list of investment principles worth adhering to. And writing for Creative Planning, Jonathan Clements considers the wide world of investing.
Sarah Newton, The Delusional Trader, reveals what the three most powerful words are. And Mark Rzepczynski, on his blog, examines emerging markets…
Be Young at Heart
- Very young toddlers don’t realize their mother is one person—instead, they split her into two characters, the “good” mother and the “bad” one—until they reach age 4 and accept and love both characters as one equally
- Having a successful long-term relationship with your portfolio is much like having a lasting relationship with your spouse—be like a 4-year-old and love your spouse for all their faults and all
- Appreciate your portfolio through both the good and the bad years accordingly
Investment Principles to Live By
- Investing is a complex business—so, avoid black and white thinking
- Respect the fact that the market is more intelligent than we are as individuals
- Build your returns on factors, consider your investments as part of a matrix—not with any singular focus—and be aware that frictions can cost
- Put your trust in expectations rather than forecasts, make objective decisions, and be intelligent about the risks you take
- Don’t be afraid of being unconventional or skeptic and embrace this generation of investing
Widen Yourself Up to Global Scope
- Less than ten years ago, big U.S. company stocks were much hated across the globe for having lost investors money over the previous decade
- We’re quick to forget such slights though thanks to recency bias which is why investors continue to believe that large-company U.S. stocks like the big five FAANG will continue to post gains
- Rather than pinning all your hopes for growth and returns on the U.S., open yourself up to the world of investment possibilities out there
How globally diversified are you? Share your comments in the section below
The Hardest Words to Admit
- There are three leading thoughts out there on why “I don’t know” are the three hardest little words for us to say aloud
- The roots of these three concepts are based in over-confidence, fear, and our childhoods; when our tendency to attempt to always give an answer begins
- The conditioning of attempting to always provide an answer to a question follows us into adulthood, but it’s far better for us to admit the unknown than pretend to all knowledge
Hold on for the Ride
- Many forecasted that increasing bond and stock allocations in emerging markets (EMs) was the thing to do in 2018
- However, investors who followed this advice have suffered horrendously in terms of performance this year in EMs
- EMs are sensitive to strong risk from various different factors, but there are also many arguments for continuing to support EM investing
- Predominantly, because of the convergence of economic growth—so, stick with EMs for the long run
Top 5 of the Week is a summarized collection of financial investment articles that we like and think you might like too. Having written thousands of pages of equity strategy and company research between us, we understand the allure of the ever-changing world of finance. Investing is an art form—and like everything, something you can work on and improve at. There are some excellent writers out there on the finance web, some offer a running commentary on today’s market, some are doing research, some have tips on how to Become a Better Investor, and some just lift the cloud of fog behind a lot of financial jargon. Each week we will keep you up to date with the top 5 articles worthy of your attention.
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