10-11-2003, 9:35 PM | Post #94563 |
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Diehard Larry Swedroe has written his fourth investment book, "The Successful Investor Today--14 Simple Truths You Must Know When You Invest". Each of his "14 Investment Truths" is a "gem":
1. Active investing is a loser's game.
2. The past performance of an actively managed fund is a very poor predictor of its future performance.
3. If skilled professionals don't succeed, it is unlikely that individual investors will.
4. The interests of Wall Street and the financial media are not aligned with those of investors.
5. Risk and reward are related: Great companies provide low expected returns.
6. The price you pay matters.
7. The most likely way to achieve above average returns is to stop trying to beat the market.
8. Buying individual stocks and sector funds is speculating, not investing.
9. Reversion to the mean of earnings growth rates is one of the most powerful forces in the universe.
10. The forecasts of market strategists and analysts have no value, except as entertainment.
11. Taxes are often the largest expense investors incur.
12. Knowledge of financial history is critical to successful investing.
13. Adding international assets to a portfolio reduces risk.
14. There is no one right portfolio, but there is one that is right for you.
More investment gems for our education:
"Turnover reduces pretax returns by almost 1% of the value of the trade."
"'It's a stock-pickers' market' is an old canard that is trotted out every so often in an attempt to both keep alive the myth that active management is the winning strategy and to keep investors paying high fees for poor, inconsistent, and tax-inefficient performance."
"For the period 1995-2001, Morningstar funds rated 'one star' outperformed funds rated 'five star' by 45%."
"In not one case (over successive five-year periods from 1970-1998) did the top performing funds continue to outperform the S&P Index."
"Only 10 out of 145 major pension funds (1987-1996) outperformed a portfolio consisting of a simple 60/40% mix of the S&P 500 index and the Lehman Bond Index."
"Investors tend to buy high after great performance and sell after poor performance. Not exactly a prescription for successful investing."
"The '44 Wall Street Fund' was the top performing fund over the decade of the 1970s. It ranked as the single worst performing fund of the 1980's losing 73%."
"The strategy of relying on the past performance of equity fund managers is a flawed strategy."
"Attempts to switch between stocks and bonds, or between stocks and cash, in anticipation of market moves have been unsuccessful much more often than they have been successful (Charles Ellis)"
"Of the 355 equity funds that existed in 1970, only 169 were left standing as of June 2001. Of the survivors, just nine managed to ouperform the S&P 500 Index."
"The stockbroker services his clients in the same way that Bonnie and Clyde serviced banks. (Bill Bernstein)"
"It's just not in the interests of either the vast majority of investment firms or the financial media to inform investors of the failure of active managers."
"Most Americans, having taken a biology course in high school, know more about amoebas than they do about investing."
"The best way to avoid any conflict of interests is to work with an advisor on a fee-only basis."
"A list of the glossy manazines' favorites of five years ago now reads like a memorial to the fallen."
"(Newspaper columnists) Scott Burns, Jonathan Clements, Humberto Cruz, Beveryl Goodman, Jane Bryant Quinn, and Jason Zweig--have the interest of investors at heart."
"The only winners in the game of active management are the Wall Street firms that generate commissions, the publications that offer 'expert' advice, and Uncle Sam who collects more taxes."
"From 1929 through 1932--small value stocks underperformed the S&P 500 Index by almost 16% per annum for four years."
"Making the mistake of simply extrapolating past returns can lead to very poor decisions."
"When the world looks darkest and prices are most distressed is just when future returns have been the greatest for those with the discipline to avoid the noise of the market and stay the course."
"There is nothing new, only the financial history you don't know."
"Young investors should root for a bear market so that future returns will be higher."
"If you can plug your ears to every attempt by anyone to predict what the markets will do, you will outperform nearly every other investor alive over the long run. (Jason Zweig)"
"Individuals who traded the most produced the lowest net returns."
"Over the past 15-years the Mensa Investment Club underperformed the S&P 500 Index by almost 13% per annum."
"An illusion of control and overconfidence in their stock-picking skill leads investors to ignore the benefits of diversification."
"Competition among all the professional active managers ensures that the market price is highly likely t
Originally posted in thread: 30365