Investment Mistake

Investment Mistake #1: Don’t Place Excessive Trust in “Experts”

Everybody has a conflict of interest with your wealth except you.

Investment institutions manage your money so they can charge fees, and financial advisors sell you products so they can earn commissions.

Similarly, the investment media seeks to maximize subscription and advertising revenue thus biasing editorial policy toward sizzle that sells rather than substance that serves.

The bottom line is your investment advice is coming from sources whose business objectives are focused on their wealth. Not yours.

“The financial markets generally are unpredictable. So that one has to have different scenarios… The idea that you can actually predict what’s going to happen contradicts my way of looking at the market.”- George Soros

“Unfortunately, the more complex the system, the greater the room for error.” – Obviously, when it comes to investing, Soros like to KISS (keep it simple, silly). He built a financial empire by adhering to this basic principle, and so should you. A simple but effective investing system will always beat the crap out of a complex system that doesn’t work.

Don’t make the mistake of trusting the experts. You should always operate from the assumption that the investment advice you receive is biased.

“An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.”– Laurence J. Peter

To understand how bias creeps into your investment advice, simply look at how the source’s pockets are lined. Know that where they stand limits what they see. We all have biases. That includes you and me.

Ray Dalio: “The biggest mistake investors make is to believe that what happened in the recent past is likely to persist.”

Ed Thorp: “Looking to outside sources for guidance in their positions. The belief that you can watch CNBC and get useful advice is very misguided. You really have to formulate your own opinion and not rely on so-called experts.”

With that said, I also believe there are many well intentioned, honest, good people doing their absolute best to work with the limited knowledge and conflicting data that make up the investment world.

Most “experts” are confused by investing just like you, or if they’re confident, it’s because they’re blind to the humbling reality that the essence of investing is putting capital at risk into an unknowable future. Outcomes are always probabilistic at best because the future will always be unpredictable. Nobody ever truly knows what will happen, including the experts.

Michael Shearn: “The three most common investing mistakes relate to the price you pay, the management team you essentially join when you invest in a company, and your failure to understand the future economics of the business you’re considering investing in.”

The result is you should never mistake professional opinions for fact just because they carry an air of expertise or come from a large institution.

Most experts are trained in a specific school of thought and don’t see outside of it.

There’s no single investment truth and anyone claiming to have it is proving that they don’t.

If you invest nothing, the reward is worth little.– Richelle E. Goodrich

Ben Horowitz (on start-up companies and founders, but it relates to all investing): “There are so many mistakes…I think probably the most common mistake is trying to be consistent. What happens is you get an idea, you sell people on the idea—investors, the employees—and you get into it and the idea turns out to be wrong. But you want to be consistent and you hold onto it longer than you should…It’s better to be right than consistent. And that’s a very hard thing to learn, particularly early in life.”

When you learn that there are many shapes and dimensions to the complexity of investment truth and stop believing the supposed experts, your healthy skepticism will bring you closer to consistent profits.

Lots of people claim to be investment experts. Where they stand limits what they can see

How many millionaires do you know who have become wealthy by investing in savings accounts? – Robert G Allen



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