20 Things I Believe About Investing

INVESTING TO PUT A neat bow on everything you just read and be fully transparent

about where I’m coming from, here are 20 things I believe about investing that can help you on your wealth-building journey.

1. I believe simple beats complex. The problem is that simple is much

harder to implement because complex will always sound more intelligent and appealing. It’s easier to be fooled by randomness with complexity. Trying harder and doing more does not guarantee better results when investing. Complexity can give you an illusion of control. 2. I believe the timing of buy or sell decisions matters less than your

holding period. Picking tops and bottoms is for the lucky and the liars. Patiently holding onto your investments is more important for most investors than timing. Your time horizon matters more than your timing in the markets. 3. I believe you should ignore what billionaires and legendary investors

think about the markets. These people don’t share your circumstances, time horizon or risk profile. Why should you take investing advice from them? 4. I believe self-control can make you far more money than just about

any other trait as an investor. I know plenty of high IQ people who are terrible investors because they don’t have the right temperament. Emotional intelligence and self-awareness are the attributes that separate the truly intelligent investors from those that are just well-educated. 5. I believe every investor in risk assets should be comfortable seeing

their money incinerated on occasion. During bear markets and

corrections some of your money simply vanishes. Sometimes you have to eat your losses. That’s the price of admission. 6. I believe being bullish or bearish matters less than progress towards

your goals. Your personal financial circumstances should dictate how you invest far more than what you think will happen in the markets. You don’t always need to have an opinion on whether markets are going higher or lower in the short run. No one knows what will happen so you’re better off preparing than predicting. 7. I believe process is more important than outcomes, but at some point

performance matters. A successful investment process requires making good decisions over and over again. But you have to understand the difference between discipline and delusion if your process isn’t working. 8. I believe a good strategy you can stick with is vastly superior to a

great one you can’t stick with. Benjamin Graham once wrote, “To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.” Perfect is the enemy of good when it comes to investment behavior. 9. I believe it’s basically impossible to forecast the economy. Even the

Fed can’t figure out the path of interest rates, inflation and economic growth and it’s part of their job. If we’re being honest, no one truly understands how the economy works, when the next recession is coming or how long the expansions will last. 10. I believe it’s much easier to explain what just happened than predict

what will happen next. The only constants in finance are human nature and moving the goalposts when you’re wrong. Pundits are very good at telling you why something unexpected was obvious in hindsight even when all of their predictions about the future have been wrong. 11. I believe defining what you won’t invest in is more important than

what you will invest in. Investors have never had it better, but the paradox of choice can be paralyzing. You can find liberation by limiting yourself to certain types of investments and ignoring everything else. 12. I believe there are many different paths to being a successful

investor, but only a handful of ways to fail. There is no one-size-fits-all when it comes to investing the right way. But unsuccessful investors typically exhibit the same poor investment behavior – market timing, overtrading, trying to outsmart the market, being overconfident in your investment abilities, investing based on political beliefs, etc.

13. I believe markets are right most of the time but not all the time.

Markets are kind of, sort of efficient. But just because markets can be crazy at times doesn’t mean it’s easy to beat them. Meir Statman once wrote, “The market might be crazy, but that doesn’t make you a psychologist.” 14. I believe fighting the last war can get you into trouble. The next risk

is rarely like the last risk. I watched plenty of investors prepare for a crash for a decade following the Great Financial Crisis only to miss out on a generational bull market. 15. I believe every investor has their own behavioral blindspots.

Knowing your lesser self is more important than worrying about what other investors are up to. 16. I believe a long time horizon is the ultimate equalizer in the markets.

A long enough time horizon is the best hedge against most market risks. 17. I believe doing nothing is the best investment decision most of the

time. As long as you have a plan in place, doing nothing is perfectly rational investment behavior. 18. I believe useful investment advice is nearly impossible to accept

during booms and busts. No one wants to hear about being responsible during a rip-roaring bull market just like no one wants to hear about the virtues of buy and hold during a soul-crushing bear market. 19. I believe most disagreements about markets come down to

differences in time horizon and risk tolerance. Markets are full of people with different goals, opinions, time horizons and appetite for risk. That’s what makes a market. It’s also what causes arguments and why there is always a buyer for every seller. 20. I believe optimists are better investors than pessimists. They say hope

is not an investment strategy, but in a way, it is. If you don’t think things will be better in the future than they are today, what’s the point of investing in the first place?