Read? The Stocks Manage Themselves
Uncle8888 really likes these ...
It doesn’t matter if you self-identify as an active or passive investor, the stocks don’t care about you either way. It’s a completely one-sided relationship.
When Ibbotson said it’s “much harder to manage people than it is to manage stocks” he was speaking in terms of running a business but the hardest person to manage is yourself when we’re talking about investing.
Research shows investors who are overconfident in their abilities and assume they’re above average investors trade more frequently. There’s an embedded illusion of control in that we assume doing more will lead to a better result. Of course, the research also shows that those investors who trade more end up with below average results.
We’re all taught at an early age that working harder and giving it 110% will lead to better results. This is true in some endeavors but rarely when it comes to the markets. Trying harder typically leads to worse results because when you press you tend to make mistakes.
There are no extra points awarded for effort or degree of difficulty when investing.
CW8888
Know ourselves and manage ourselves according to our historical investment outcome and performance across past market cycles; refine, revise, or adjust investing strategies to move forward to next market cycles to build wealth or generate cash flow from the stock market according to our investing goals.
Back testing his own past 19 years of data points; he is now more blur.
Is holding too much cash as war chest a serious drag on his investment portfolio performance?
Hmm ...
Posts
Hi Uncle8888,
ReplyDeleteInvesting is not easy, but that's what makes it fun! :)
There's a fine line between doing too much & refining the investment process. Dalbar's annual studies for the past 24 years have consistently shown the average investor to underperform the index, confirming what Ben Carlson is saying above.
Dalbar 2018 report
Basically the main problem is the Mind. :)
When we adopt an investing Method & Money Mgmt, we will need to be aware of shortcomings as well. No method will be right or good all the time. Sometimes our method or money mgmt will make us look foolish. And we need to be OK with it.
For e.g. in my trend following, I know that during market volatility when there are fake breakouts or breakdowns, I will be whipsawed and will perform worse than just buy-and-hold. This is what happened in Feb/Mar & Jun/Jul of 2018. And then my trend following signals really helped in the Oct to early-Jan steep correction.
Sometimes, before thinking of tweaking or trying something different, it's best to go back to principles: Do we need it? (whether we've won the game) Are we able to do it? (liquidity, time horizon, portfolio size, sizeable income) Are we willing to do it? (risk appetite, drawdowns, capital loss)
Parrot this : Sometimes, before thinking of tweaking or trying something different, it's best to go back to principles: Do we need it? (whether we've won the game) Are we able to do it? (liquidity, time horizon, portfolio size, sizeable income) Are we willing to do it? (risk appetite, drawdowns, capital loss)
ReplyDelete:-)
Is our investing goals based on need or want?
Delete1) Do weed to build more long-term wealth for future cash future or just want cash flow now?
2) Do really need more cash flow or just want more?
Curious to know what is the rate of return after 30 yrs?
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