Blogs & Comment

Quotable guide to passive investing (XIV)

Here is Part XIV of the Quotable Guide to Passive Investing. Part I is here.To scroll through Parts II to XIII, click on links at the bottom of each page.
Yes, You Can Supercharge Your PortfolioBen Stein, Phil DeMuth
“The financial service industry is forever engineering and promoting products to sell to investors.”
“As John Bogle pointed out in the Financial Analysts Journal, after expenses, taxes, and inflation, the average actively managed mutual fund delivered only 34% of the profit of an S&P 500 Index fund from 1983 to 2003.”
“The time to decide you’ve taken on too much risk isn’t the day after the market is down 20 percent.”
“To the extent that we want to dampen the volatility of our stock portfolios, we just add bonds.”
“An all-stock or an all-bond portfolio isn’t usually as efficient as one that contains both asset classes.”
“The risks of your portfolio can’t be boiled down to its standard deviation. The real risk is that your portfolio fails to meet your investment goals.”
“Monte Carlo simulation is the best tool available today to analyze a portfolio’s prospective performance, but like any tool, it can be dangerous if used ineptly.”
“John Bogle, founder of the Vanguard Group and the patron saint of investors everywhere, very sensibly maintains that a broad index fund such as a total stock market index is the ideal equity holding.”
“Investors pursue their dreams of beating the market through such futile means as individual stock picking, short-term market timing, and momentum investing–.”
“Assets moving in opposite directions for years can change on a dime and start moving in tandem.”
“Our goal should be to build a well-constructed portfolio that can suffer the slings and arrows of market forces in a variety of situations and emerge intact from the ordeal.”
“The goal of portfolio planning is to use diversification to secure the maximum expected returns for the minimum expected risk in meeting portfolio objectives.”
Your Money and Your BrainJason Zweig
There may be nothing across the entire spectrum of human endeavor that makes so many smart people feel so stupid as investing does.”
“Scientists have made stunning discoveries about the ways the human brain evaluates rewards, sizes up risks, and calculates probabilities.”
“Everyone knows that you should buy low and sell high–and yet, all too ofen, we buy high and sell low.”
‘Financial decision-making is not necessrily about money,’ says psychologist Daniel Kahneman of Princeton University. ‘It’s also about intangible motives like avoiding regret or achieving pride.'”
“As a general rule, the ones who aren’t sure are the only ones who are right.”
“If you think you’re a financial genius, you’re almost certainly dumber than you think.”
“People don’t need extraordinary insight or intelligence. What they need most is the character to adopt simple rules and stick to them.”
“Once you score big on a few investments in a row, you can be the functional equivalent of an addict–except the substance you’re hooked on isn’t alcohol or cocaine, it’s money.”
“Presented with almost any data, your investing brain will feel it knows what’s coming–and it will usually be wrong.”
“If you’re compulsively checking up on the prices of your investments, you’re not only hurting your financial returns, you’re unnecessarily taking precious time away from the rest of your life.”
“A research team checked the portfolios of the people who claimed to have beaten the market. It turned out that 88% had exaggerated their returns.”
You’ve Lost It, Now What?Jonathan Clements
“Markets bounce back. Individual companies often die.”
“If you chase market trends, you will always be late to the party.”
“Stock market forecasters exist to make astrologers look good.”
“Take my word on it: Buy-and-hold is still your best long-run strategy.”
“As with bonds, real estate deserves a prominent place in your portfolio.”
“Ignore the blather emanating from the television, the newspaper, and the other side of the garden fence.”
“Investing is best when it is simplest.”
“Forget Wall Street’s exotic garbage. Instead, stick with stock, bond, and money market funds.”
“A mix of 80% bonds and 20% stocks is no riskier than an all-bond portfolio, but its expected return is much higher.”
“In the 12 months after the bottom of each of the past 12 bear markets, stocks gained an average 32.5%.”
“Costs and risk can be controlled. Performance is in the hands of the gods.”
“If you are not careful, rebalancing can mean massive tax bills.”
“I would not sign on with any adviser who wants to be compensated with commissions.”
“Consider purchasing a mix of inflation-indexed Treasury bonds, high-quality corporate bonds, and high-yield junk bonds.”
“Consider stock-index funds. Diversify globally. Favor low-cost bond funds, Add high-yield junk bonds. Buy real-estate investment trusts.”
“Diversification is sometimes described as Wall Street’s only free lunch.”
“Focus on the little things. Hold down taxes. Cut investment costs. Favor index funds. Rebalance regularly. Save a little more each month.”
“Options? Futures? Mortgage derivatives? Hedge funds? Ignore that garbage.”
“The challenge isn’t figuring out what to do. That is fairly easy. Instead, the real challenge is getting yourself to do it.”