Friday, December 12, 2014

10 Legendary Investment Rules From Legendary Investors

I just read this fantastic article by Lance Roberts, which is such a timely reminder.

These guys are all f***ing legendary. I would rather meet anyone of them instead of Taylor Swift. I actually might pass out if I see them!

(Hey, would you look at that! 10/10 guys! Is finance a sexist world or what? Feminists out there be ragin' right now)


Who Where What
Jeffrey Gundlach DoubleLine "The trick is to take risks and be paid for taking those risks, but to take a diversified basket of risks in a portfolio."
Ray Dalio Bridgewater Associates “The biggest mistake investors make is to believe that what happened in the recent past is likely to persist. They assume that something that was a good investment in the recent past is still a good investment. Typically, high past returns simply imply that an asset has become more expensive and is a poorer, not better, investment.”
Seth Klarman Baupost “Most investors are primarily oriented toward return, how much they can make and pay little attention to risk, how much they can lose.”
Jeremy Grantham GMO “You don’t get rewarded for taking risk; you get rewarded for buying cheap assets. And if the assets you bought got pushed up in price simply because they were risky, then you are not going to be rewarded for taking a risk; you are going to be punished for it.” 
Jesse Livermore - “The speculator’s deadly enemies are: ignorance, greed, fear and hope. All the statute books in the world and all the rule books on all the Exchanges of the earth cannot eliminate these from the human animal….”
Howard Marks Oaktree Capital Management “Rule No. 1:  Most things will prove to be cyclical. – Rule No. 2:  Some of the greatest opportunities for gain and loss come when other people forget Rule No. 1.”
James Montier GMO "There is a simple, although not easy alternative [to forecasting]... Buy when an asset is cheap, and sell when an asset gets expensive.... Valuation is the primary determinant of long-term returns, and the closest thing we have to a law of gravity in finance."
George Soros Soros Capital Management “It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.
Jason Zweig Wall Street Journal “Regression to the mean is the most powerful law in financial physics:Periods of above-average performance are inevitably followed by below-average returns, and bad times inevitably set the stage for surprisingly good performance.
Howard Marks Oaktree Capital Management The biggest investing errors come not from factors that are informational or analytical, but from those that are psychological.” 

This is of course an ugly ass table if there ever was one, but hell, if I was good at HTML and website editing, the rest of my blog wouldn't look this bad, would it? Anyway, this is definitely a keeper of an article, which is why I'm specifically archiving it in a post on my blog forever! These are timeless quotes, which are gonna be permalinked, just like Bob Farrell's 10 Rules and Jason Zweig's timeless advice.

Saturday, October 11, 2014

Jason Zweig: Good Advise Rarely Changes

Jason Zweig is a columnist on the WSJ, and I would argue probably one of the most influential writers in the modern finance world.


The very first finance book I read was the version of "The Intelligent Investor" with his foreward. I am now halfway stuck reading his behavioral finance book called "Your Money & Your Brain", which is a great book about the human aspect of investing. Put aside your calculators and spreadsheet, this book is a great book to understand the less quantitative, but still very important, part of investing.

I was also quite impressed with his interview on WealthTrack with Conseulo Mack. He is very cool and clear headed throughout the interview, which to me, shows that he is totally familiar with all the topics and has firmly given deep thought about them. I quite like this guy.

I was very very pleasantly surprised to stumble upon and read one of his dated articles on WSJ. I think this article is one of the most brutally honest pieces about a guy sincerely trying to impart his wisdom to people who can only better themselves by hearing it. This article is a gem, and I implore anyone, ANYONE looking to reign in their behavioral bias to give his article a full read and perhaps some weekend contemplation.

I am going to pick out my favourite lines from his article:

My job is to write the exact same thing between 50 and 100 times a year in such a way that neither my editors nor my readers will ever think I am repeating myself. That’s because good advice rarely changes, while markets change constantly...
The advice that sounds the best in the short run is always the most dangerous in the long run. Everyone wants the secret, the key, the roadmap to the primrose path that leads to El Dorado: the magical low-risk, high-return investment that can double your money in no time.
... research by the psychologist Paul Andreassen showed many years ago, people who receive frequent news updates on their investments earn lower returns than those who get no news...
From financial history and from my own experience, I long ago concluded that regression to the mean is the most powerful law in financial physics: Periods of above-average performance are inevitably followed by below-average returns, and bad times inevitably set the stage for surprisingly good performance.
My role is also to remind them constantly that knowing what not to do is much more important than what to do. Approximately 99% of the time, the single most important thing investors should do is absolutely nothing.
But this time is never different. History always rhymes. Human nature never changes. You should always become more skeptical of any investment that has recently soared in price, and you should always become more enthusiastic about any asset that has recently fallen in price. That’s what it means to be an investor.
The longer the odds, the greater the obligation to try to beat them. That’s why I keep at it, even though I have profound doubts that most people will ever learn how to be better investors. I never expect everyone to listen; all I ever hope for is to get someone to listen.
In summary: Good advise doesn't change, and reduced to its simplest form, it is essentially: Buy low, sell high. Tune out the market noise, reference past history and look at the long term. If everyone is zigging, think about zagging. Everyone can't all be right together because the market is not a win-win system, it's a negative-sum system.
This is a good and timely reminder to myself to always look at the big picture and not get caught up in the small daily blips when you are long term investor. 
This probably should go up in the hall of fame, along with Bob Farrell's 10 rules, which I think is another set of excellent advice reduced to digestible and actionable bits for the average investor. I hope maybe people might want to consider bookmarking this page, or his article directly, and give it a read through if you're at the crossroads of a major financial decision or choice.