To start 2017 off on the right financial footing, in five minutes or less … let’s take a moment to share some of my favourite excerpts from my 2016 posts:
A year’s worth of “financial stop-doing” advice (January 2016)
“Instead of yearning for a unicorn, you are better off following decades of evidence-based insights on how to patiently pursue the market’s expected returns while realistically managing the uncertainties involved.”
Stop chasing dividends (February 2016)
“[I]nstead of fussing over the relatively irrelevant detail of whether a company distributes its profits as dividends or share value, we focus on the role that stocks and bonds play in your overall portfolio.”
Stop letting pessimistic predictions get you down (March 2016)
“We have far more reason to believe that markets will continue to deliver solid returns to patient investors than to despair that they won’t. All in favour of optimism, raise your hand.”
Stop making mistakes (April 2016)
“Even though we know it’s a mistake to buy high and sell low, there’s ample evidence that this is exactly what most of us end up doing anyway. … So, one powerful way to lower the number of mistakes you make is to disregard anecdotes, hearsay and hot news when making investment decisions.”
Stop underestimating life’s risks (May 2016)
“Many investors underestimate risk, believing that they can tolerate far more of it than they actually can.” When risk is realized, some will panic and sell their holdings, usually at a loss.
“It is these risks and uncertainties [caused by events like Brexit]that create the long-term higher rates of return that have been available in equities.Lower prices, and thus lower valuations today, mean that future expected returns should be higher. The problem is that we don’t know exactly when these higher prices will materialize, so it is very important to be patient.If you are comfortable with this last point, then maybe [the outcome of the Brexit referendum] could actually represent a buying opportunity.”
Stop worrying about missing out (July 2016)
“Just like Facebook, social chitchat about investment performance isn’t reality; it is often carefully selected to highlight the winners. … By tending to your own investment goals and ignoring the Jones’, you can increase your odds that you’re not missing out on a thing.”
“I’m not predicting the timing, degree or even the inevitability of a real estate downturn. But it is very important to remember that returns of all asset classes work in cycles. Just because a certain asset class has delivered outsized returns for a long period of time doesn’t mean that the laws of ‘financial gravity’ are somehow broken.”
Retiring reliably, leaving a legacy or balancing both? (September 2016)
“[W]hen shooting for a greater financial legacy or higher income sustainability, remember that there are trade-offs either way. To shoot for greater wealth entails more risk. To keep your money safer implies lower returns. Different factors – such as personal preference, risk tolerance and legacy goals – play a part in which balance makes the most sense for you.”
Never stop learning (November 2016)
“Arguably, one of the most important financial and life lessons of all time: Never stop learning. Taking my own advice, I set aside time every year to attend a few select educational forums in person. … Here are 3 key take-aways from my deep dive into the evidence-based investment think tank.”
Post US election reflections (November 2016)
“America has faced the unknown since 1776. It’s just that sometimes people focus on the myriad of uncertainties that always exist while at other times they ignore them (usually because the recent past has been uneventful). American business will do fine over time. And stocks will do well just as certainly, since their fate is tied to business performance. Periodic setbacks will occur, yes, but investors and managers are in a game that is heavily stacked in their favor. … The risks of being out of the game are huge compared to the risks of being in it.” (Warren Buffett quote)
“Forecasts and predictions are exercises in marketing. Outrageous and wrong forecasts are typically forgotten, and when one randomly happens to come true, the guru is lauded as the next Nostradamus. It is an expensive and fatuous practice, and the finance industry should give it a permanent rest.” (Barry Ritholtz quote)
Keep an eye out for continued posts, and be in touch anytime with your questions or comments.
Thanks for listening!