Evening Must-Read: Noah Smith: Ten Investing Facts of Life
...investing aphorisms.... Almost all... are good advice.... There was really only one I didn’t like: '67. Finance would be better if it was taught by the psychology and history departments...'. As someone who teaches finance, I might sound a little self-serving for saying that academic finance has valuable things.... But... [many of] Housel’s... aphorisms... come from... finance professors!... 10 of my favorites....
(6)... Erik Falkenstein says: 'In expert tennis, 80% of the points are won, while in amateur tennis, 80% are lost. The same is true for... investing'.... (14)... Nick Murray.... 'Timing the market is a fool's game, whereas time in the market is your greatest natural advantage.'... (24)... 40% of stocks have suffered 'catastrophic losses' since 1980.... If you understand the math of the random walk... this won’t be very surprising! (28.)... 72% of mutual funds benchmarked to the S&P 500 underperformed.... Finance profs have been yelling about this for decades.... (44). Our memories... extend... a decade back.... [Time] erases many important lessons.... (46)... The most boring companies... can make some of the best long-term investments.... Finance researchers have noticed the outperformance of value stocks over glamor stocks for decades! (50)... U.S. stocks increased 2,000-fold between 1928 and 2013, but lost at least 20% of its value 20 times.... (68)... Tim Duy, 'As long as people have babies, capital depreciates, technology evolves, and tastes and preferences change, there is a powerful underlying impetus for growth that is almost certain to reveal itself in any reasonably well-managed economy.' This is great advice. But it’s also a reason not to invest in stocks in Japan.... (90)... Those who trade the most earn the lowest returns.... (97)... The single best three-year period to own stocks was during the Great Depression. Not far behind was the three-year period starting in 2009.... Long-run predictability is one of the most interesting facts discovered by finance researchers... what earned Yale economist Bob Shiller his 2013 Nobel.... Housel’s compilation of aphorisms is a good list. Check it out. And remember, finance academics are hard at work discovering interesting and useful facts about investing, trading and asset markets."
