As Charlie Munger liked to say, “Invert, always invert.”
Here are some things about investing that I don’t believe:
I don’t believe there is a sole way to invest. Everyone has a different emotional make-up and lesser version of themself. Plus, experiences and circumstances can shape your attitudes towards risk and return.
There are a lot of strategies that can work. You just have to find the one that works for you and then stick with it regardless of what everyone else is doing.
Easier said than done.
I don’t believe anyone has the ability to predict what’s going to happen next with regularity. Hedge fund managers can’t do it. Economists can’t do it. Investment strategists can’t do it. I can’t do it. You can’t do it.
And that’s OK. Everyone’s bad at predicting the future because predicting the future is hard.
I do believe you can prepare for a wide range of outcomes without predicting what those outcomes will be in advance.
I don’t believe politics should ever play a role in your investment decisions. Partisan politics feels like they are infused in everything these days. It’s impossible to avoid.1
Presidents get too much credit when the economy is strong and too much blame when the economy stumbles. Politicians don’t control the economy, stock market, gas prices or grocery prices.
Here are the total returns from the past four presidential election dates:
- Election day 2008 +675% (14% annualized)
- Election day 2012 +400% (14% annualized)
- Election day 2016 +207% (15% annualized)
- Election day 2020 +81% (16% annualized)
You can believe what you want to believe about politics but those beliefs have no place in your portfolio.
I don’t believe investing is ever easy. You can make it simpler but investing is hard. There’s no shame in admitting that.
I don’t believe there is a perfect portfolio. It’s only known with the benefit of hindsight.
I don’t believe you should make investment decisions based on what Warren Buffett is doing. There were stories recently about a record cash pile at Berkshire Hathaway:
Some people think it’s time to start worrying about the stock market because Buffett is getting more defensive. Maybe it is, maybe it isn’t but that’s not the point.
I’m a huge Buffett fan.
I just don’t believe a 94-year-old billionaire stock-piling cash in his insurance conglomerate has the same time horizon and risk profile as your 401k or brokerage account.
I don’t believe you need to outperform to achieve financial success. Alpha sounds great and all but investors who are able to earn the market return without underperforming their own funds is a worthy goal to me.
Just don’t underperform yourself.
I don’t believe buy & hold ever truly dies. Every time the stock market crashes or goes sideways for an extended period of time, pundits are quick to bury long-term investing as a viable strategy.
It would be like asking someone with the flu, “You don’t look so good. Are you dead?”
Buy and hold just goes into hibernation at times. Same thing with eulogies about the 60/40 portfolio.
Buy and hold wouldn’t work in the long run if it didn’t have the occasional dry spell in the short run.
Nothing works all the time.
I don’t believe following the news makes you a better investor. I’m a markets junkie. I love following this stuff. But there’s a big difference between interesting and actionable.
If it’s already in the headlines you probably can’t make money from it.
I could give you headlines from the future and you still probably wouldn’t be able to turn a profit.
Most of the stuff we spend our time worrying about in the short-term won’t make a lick of a difference in the long-term.
The news is already making you miserable. Don’t let it make you lose money too.
I don’t believe risk ever goes away. Investing is an act of trade-offs and regret-swapping. You trade one risk for another.
And then you let the chips fall where they may.
Further Reading:
If Prices Are Wrong You Should Be Rich
1I would pay good money to have YouTube TV block any and all political ads from commercials during football games right now. It hurts my brain to watch them over and over again.
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