Top 5 of the Week of February 11th
Abnormal Returns’ Tadas Viskanta heads up our Top 5 this week by looking at why we study market history. Epsilon Theory writer Ben Hunt examines the investment zeitgeist. And The Irrelevant Investor Michael Batnick discusses the problem with dollar cost averaging.
Morgan Housel, a partner at Collaborative Fund, shares some things he is pretty certain about. And A Wealth of Common Sense’s Ben Carlson cautions us about idolizing fraudsters…
A Look at What Might Occur
- There are a couple of reasons that investors study market history—the first is usually an additional way to sell your expertise
- Secondly, by studying the past we hope to understand what may happen in the future
- DCA is no cure all—though it helps as no individual investor can control how or where the market goes—instead, set up a program that auto invests whatever the market is doing to methodically avoid the noise
The Investment Zeitgeist
- For the modern investor, the largest risk your portfolio faces is any change to the investment zeitgeist
- Ignore the narrative-level phenomena of world events and politics—they’re big, “but they’re not Death”
- One of the hardest things to do is to recognize a zeitgeist while you’re in it though to be able to make behavoral changes accordingly
Hang in There
- Lump sum investors have not had it easy over the last 20 years, how many people were able to put $10,000 into the S&P 500 that long ago and not touch it?
- Dollar cost averaging allows investors to buy more low and less high in an attempt to outperform the market
- Typically though, this doesn’t work as no individual investor can control how or where the market goes—it’s no cure-all—though it is possible to set up a program that auto invests whatever the market is doing to methodically avoid the noise
Are you a lump sum investor? Share your comments in the section below
Some Doubtless Truisms
- Stock price commentaries can inflame the masses in such a way that causes investing misbehaviors to spiral out of control meaning markets don’t often stick to an average valuation
- Trump’s first year in office and record-low volatility will no doubt be viewed as fascinating
- Investors who endure risk have more to teach us than those who apparently overcame it
- Being pessimistic rather than optimistic is more appealing because it’s hard to see how things will change so dramatically in the future
Don’t Be Tempted to Fake It Till You Make It
- Gordon Gekko’s film character back in 1987 was intended to show how corrupt the financial world had become
- Except that the film had the opposite effect, instead of turning people away, it increased people’s interest in investing and finance
- The now infamous Fyre Festival—an event which never happened but conned people out of a lot of money—strikes up the same anxiety, that those who watch it will be impressed by such fraudsters who can’t deliver
- Don’t follow that path—it doesn’t lead anywhere concrete
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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