Jason Zweig wrote In much of life, doing things right over and over again is a sign of skill; expert musicians, for instance, rarely hit a wrong note. And the skill of one professional musician doesn’t make it harder for the others to be equally expert. But in the financial markets, where so many investors are highly skilled, their actions cancel each other out as they quickly bid up the prices of any bargains—paradoxically making luck the main factor that distinguishes one investor from another. And a streak of being right can make anyone forget how important luck is in determining the outcome.
I see a lot of Mr. Rights all around me, including people I thought were sensible and human enough to make mistakes. I see a lot of people (including yours truly) having made large doses of effortless money in recent times. And I see a lot of people often sliding into situations where they don’t want to waste time and effort using their brains to make sensible, intelligent investment decisions…because all they are looking at are happy, effortless, outcomes. You better use your brain, especially because you used it to earn your savings that you now want to invest, and especially now when we are passing through rapid and frequent bouts of irrationality.
P.S. A British neurophysicist has said that if we would have to approximate electronically an average human brain, it would cost three billion-billion dollars; that’s $3,000,000,000,000,000,000; and that’s 38,000 times the global GDP. You and I are fortunate to own one for free. Maybe, only when we remember this number that’s put to an average human brain, we may try to sometimes use it more rationally, especially while investing our savings during a bull market, and after having earned large doses of effortless money.
Trading and Investing Lessons From Ray Dalio. Risky things are not in themselves risky if you understand them and control them. If you do it randomly and you are sloppy about it, it can be very risky.-Ray Dalio. The biggest mistake investors make is to believe that what happened in the recent past is likely […]
For a value investor, value is determined using methods that produce a fuzzy but very important benchmark, which is called “intrinsic value.”- Joel Greenblatt “One of the greatest stock market writers and thinkers, Benjamin Graham, put it this way. Imagine that you are partners in the ownership of a business with a crazy guy named Mr. […]
Rule #1: The Quality Rule The quality rule is based on the common-sense notion that high-quality businesses have greater wealth compounding abilities than low-quality businesses. The problem is how to define a “high-quality business.” One of the key characteristics of a high-quality business is a long history of steadily increasing dividend payments. A company must have […]