10 Legendary Investment Wisdoms From Legendary Investors

Throughout history, investors have repeatedly made the same investment mistakes.

Whether it was selling at the bottom of major market routs, or buying near the peaks of the next cyclical bull market, the results have, for the most part, been generally the same.

I have written many articles previously on investing, portfolio and risk management and the fallacy of long-term “average” rates of returns. Unfortunately, few heed these warnings until it is generally far too late.

One of the biggest problems with “buy and hold” investment advice is what I call a“duration mismatch.” The issue that arises is individuals do not necessarily have the “time” to achieve the long-term average returns of the market.

“Most have been led believe that investing in the financial markets is their only option for retiring. Unfortunately, they have fallen into the same trap as most pension funds which is hoping market performance will make up for a ‘savings’ shortfall.

However, the real world damage that market declines inflict on investors, and pension funds, hoping to garner annualized 8% returns to make up for that lack of savings is all too real and virtually impossible to recover from. When investors lose money, it is possible to regain the lost principal given enough time, however, what can never be recovered is the “time”lost between today and retirement. “Time” is extremely finite and the most precious commodity that investors have.

In the end – yes, emotional decision making is very bad for your portfolio in the long run.

Emotions and investment decisions are very poor bedfellows. Unfortunately, the majority of investors make emotional decisions because, in reality, very FEW actually have a well-thought-out investment plan including the advisors they work with. Retail investors generally buy an off-the-shelf portfolio allocation model that is heavily weighted in equities under the illusion that over a long enough period of time they will somehow make money. Unfortunately, history has been a brutal teacher about the value of risk management.”

Importantly, I am NOT ADVOCATING, and never have, “market timing” which is being “all in” or “all out” of the market. Such portfolio management can not be successfully replicated over time.

What I am suggesting is that individuals CAN MANAGE THE RISK in their portfolios to minimize the destruction of capital during market down turns. 

It is important to remember that we are not investors. We do not control the direction of the company, their management decisions or their sales process. We are simply speculators placing bets on the direction of the price of an electronic share that is heavily influenced by the “herd” that makes up the markets.