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“If you’re not confused, you don’t understand what’s going on.”
And I’ll tell you this: one of the greatest lessons I’ve learned from these money masters is that you don’t have to predict the future to win this game.
Freedom Fact 1: On Average, Corrections Have Occurred About Once a Year Since 1900
Freedom Fact 2: Less Than 20% of All Corrections Turn Into a Bear Market
Freedom Fact 3: Nobody Can Predict Consistently Whether the Market Will Rise or Fall
Freedom Fact 4: The Stock Market Rises over Time Despite Many Short-Term Setbacks
Freedom Fact 5: Historically, Bear Markets Have Happened Every Three to Five Years
Freedom Fact 6: Bear Markets Become Bull Markets, and Pessimism Becomes Optimism
The stock market is a device for transferring money from the impatient to the patient. —WARREN BUFFETT
Freedom Fact 7: The Greatest Danger Is Being out of the Market
What most people really want, regardless of how much money they have today, is freedom. Freedom to do more of what they want, whenever they want,
“What I realized is nobody knows and nobody ever will,” he says. “So I have to design an asset allocation that, even if I’m wrong, I’ll still be okay.”
I’m so obsessed with this idea of not losing that I now tell all my advisors, “Don’t even bring me an investment idea unless you first tell me how we can protect against or minimize the downside.”
“five-to-one rule”
how to reduce risks while maximizing returns.
One of the most serious problems in the mutual fund industry, which is full of serious problems, is that almost all mutual fund managers behave as if taxes don’t matter. But taxes matter. Taxes matter a lot.”
‘Buy and Hold’ Is Still a Winner.”
David told me how individual investors can diversify by owning low-cost index funds that invest in six “really important” asset classes: US stocks, international stocks, emerging-market stocks, real estate investment trusts (REITs), long-term US Treasuries, and Treasury inflation-protected securities (TIPS).
In other words, everything comes down to owning an array of attractive assets that don’t move in tandem.
learned that courage was not the absence of fear, but the triumph over it. The brave man is not he who does not feel afraid, but he who conquers that fear. —NELSON MANDELA
Cowards die many times before their deaths; the valiant never taste of death but once.”
A simple rule dictates my buying: be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread.
In short, bad news is an investor’s best friend.
memory: “Over the long term, the stock market news will be good.”
What asset classes will give you the highest probability of getting from where you are today to where you need to be?
The point is, you want an advisor with the skills to tailor your portfolio to suit your specific needs. A one-size-fits-all approach to asset allocation can be disastrous.
By age 90, he’d accumulated $70 million! The lesson: never underestimate the awesome power of disciplined saving combined with long-term compounding.
As Princeton professor Burton Malkiel told Tony, unsuccessful investors tend to “buy the thing that’s gone up and sell the thing that’s gone down.” One benefit of rebalancing, says Malkiel, is that it “makes you do the opposite,” forcing you to buy assets when they’re out of favor and undervalued. You’ll profit richly when they recover.
“Is this truly the hard trade? Does it really have asymmetric risk/reward? Is it a five-to-one or a three-to-one? What’s the entry point? Where are your stops?”
And what I’ve found again and again is that 80% of success is psychology and 20% is mechanics.
Mistake 1: Seeking Confirmation of Your Beliefs Why the Best Investors Welcome Opinions That Contradict Their Own
“Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices.”
“Where could I be wrong? What am I not seeing? What’s the downside? What am I failing to anticipate? And who else should
I speak with to deepen my knowledge?” Questions like these help to protect me from the danger of confirmation bias.
Mistake 2: Mistaking Recent Events for Ongoing Trends Why Most Investors Buy the Wrong Thing ...
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Great things are not accomplished by those who yield to trends and fads and popular opinion. —JACK KEROUAC
today’s winners tend to be tomorrow’s losers.
The Solution: Don’t Sell Out. Rebalance.
“If you can’t add value, if you can’t create an asymmetry, then the best thing you can do is minimize your costs,”
Guy suggests checking your portfolio only once a year.
A man is but the product of his thoughts. What he thinks, he becomes. —MAHATMA GANDHI
Are you committed to being happy, no matter what happens to you?
