Hard to Swallow Pills
Now that we’re experiencing a period of heightened volatility and asset valuations have come off their lofty heights, here are some hard to swallow pills about investing.
-A great company isn’t necessarily a great investment.
-You have no special insight to where the market is going to go or what a stock is going to do. If you think you do, you are lying to yourself. If you do have special insight, that is likely because it is material non-public information, which you are barred from trading on.
-For every Apple, there is Theranos.
-Your focus should be on avoiding mistakes, not on making great moves.
-Big pullbacks happen frequently. Massive ones somewhat less frequently. Stop acting surprised when it happens.
-If your emergency fund was invested in the stock market, you didn’t really have an emergency fund.
-Risk and return are always correlated. They cannot be separated.
-The value of cryptocurrency is (roughly) its ability to facilitate money laundering and illegal drug purchases over the internet.
-Cryptocurrency cannot simultaneously be a widely accepted substitute for existing currencies while also being a volatile speculative asset.
-There is no reason for most people to watch cable financial news.
-Beware the “financial advisor” who works at a life insurance company. A vanishingly small number of people need whole life insurance, but they will try to convince you that everyone does.
-In lots of cases, a house is a large liability masquerading as a safe asset.
-Boring can often beat groundbreaking over the long term.
-Baby boomers lived practically their entire working lives during a period of falling interest rates, which buoyed all kinds of asset prices from stocks to bonds, to residential real estate. Younger generations are likely to experience a much more inhospitable environment, as future asset returns will likely be lower, interest rates will likely be higher, and houses remain expensive.
-Doing nothing in response to the news cycle often beats doing something.
-If it sounds too good to be true, it probably is.