A short time ago, I shared some things a new investor might want to know or be mindful of as they start their financial freedom journey. On that note, I believe some investing advice never goes go out of style, there are some investing truths to behold.
Here are my investing truths you can take to the bank:
- All investing is subject to risk – even the safest investments have some risk.
- Past performance is not a predictor of any future result.
- In a diversified portfolio gains from some investments will help offset losses from others.
- No matter how good you think you are as an investor, you cannot control your portfolio’s returns.
- In order of long-term returns, cash has appreciated less than bonds and bonds have appreciated less than stocks.
- The stock market is very unpredictable in the short-term but rather predictable in the long-term.
- Every investor should focus on limiting mistakes because there is no perfect portfolio.
- Somebody will always outperform you – accept it.
Do you have any investing truths to share?
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.
Take the time to review your stock. If they don’t meet your requirements, sell them.
Probably a smart move.
Great article with some nice tips.
I especially like “Every investor should focus on limiting mistakes because there is no perfect portfolio”
Thanks Dan!
Good points. I would also add – do not fall in love with an investment. If it is no longer working – reevaluate and let it go if it is not living up to your expectations. Cut your losses and move on.
Fair points May, thanks for those comments. Hope to see you around the site more.
”
* You must thoroughly analyze a company, and the soudness of its underlying businesses, before you buy its stock;
* You must deliberately protect yourself against serious losses;
* you must aspire to adequate, not extraordinary, perfomance;”
(c) Ben. Graham
I could add:
* Don’t buy high in a 1929 style without knowing the valuation of what you buy;
* Don’t sell on short term fear and so called “catastrophic plummeting” when it’s a variation of 2/3%…;
* Don’t lose capital; until you trigger you lose and gain really nothing;
* Don’t follow big ties awesome practices that will makes you a “lot” of money based on past macro-markets performance. Like with O’Shaughnessy;
“You must deliberately protect yourself against serious losses” – great stuff by a legend for sure.
Thanks for sharing farcodev. BTW, where have you been? Long time no comment?
Mark
Hey, you are welcome Mark!
I’m sorry, I following a certain number of financial blogs by RSS but I don’t comment often; I’m more a lurker/reader. I only invest since 2012 so I have more to learn than to say, except for some times 🙂
Cheers!
Lurk and read away. Good to know you’re still following. We’re all still learning 🙂
Nothing wrong with these, but they basically apply to traders. Those investing for Income can ignore many of these.
Good point and you’re right, investors are not traders. Doesn’t even mean the same thing to me.
Stick to your plan and don’t listen to hot tips.
Great point, avoid “tips”!
The quickest way to get one million dollars in the stock market is to start with two.
Ha, that’s a good I’ve seen/read a couple of times. Hopefully that didn’t happen to you Dan?
I should be so lucky to even be on the wrong side of that one 🙂
Well, that’s good. I would also (happily) take $1 M now as well!
Here’s my contribution: Don’t entirely trust any financial “advisor” who doesn’t have a clearly stated fiduciary duty. They are more interested in their gains first, and your gains second
I think that’s a great contribution Helen. Do you see the industry tilting away from commission-based models at some point and more of a fee-for-service model?
Hi Mark: Not sure. I had in mind brokerage company “advisors”, where generally one pays a percentage of assets as the fee. They also make additional commissions (unbeknownst to the average client) by selling (they call it recommending) new issues, income trusts, promoting certain stocks, debentures, etc.
Ah, gotcha, well, I don’t see that particular model changing with the brokerage companies. I think they will always want a slice of the financial pie.
Stick to your plan. Don’t be tempted by hunches, hot tips or water cooler talk.
Plan for Tomorrow but Live for Today.
Plan for tomorrow, live for today, sounds like our financial plan Peter. Thanks for sharing.
A good list of truths that is for sure..
Not sure if this fits the list, but “companies that pay dividends are usually more solid companies than ones that don’t”
That’s true to a point I think, although not all dividend-paying companies can be guaranteed to be the same solid performers going forward. The future is always uncertain.
Well said Mark… and sometimes it’s hard for some people to hear that but it’s true.
You got it, the truth hurts sometimes! 🙂
Another truth: you can’t beat the market
You can, but it’s tough to do.
I’d add a couple as well.
Present programs are subject to change by future governments.
One’s future health may or may not be what one anticpates.
Totally agree with both Lloyd.
It’s true that no matter how good you are as an investor, you can’t control returns. You might have had some awesome returns and luck investing on the market, but lots of the time it’s just luck and hunches and a lot of thinking and research.
There can be lots of luck associated with investing decisions. Like the weather, tomorrow’s financial market is impossible to predict.