When we look at the different scopes of the economy, it is easy to notice that the more science involved in a particular sub-set of the economy, the more high level academics plays a role in forming a high quality worker. For instance, on one end of the spectrum, we have doctors and engineers, who clearly need higher education to learn how to best perform their craft in the real world. However, this is not true of the other side of the economic spectrum. The worlds best musicians and artists are mostly, if not all, self-taught. This is not a coincidence, and is partly driven by the fact that you cannot teach creativity very easily.
Investing, while it lies somewhere in the middle, is more of an art, than it is a science ..... which is why PE ratios are meaningless in a vacuum and constantly throw off market participants ... which is why [most] hedge fund guru's can't beat SPY over sustained periods of time ... which is why sooooo many folks continue to make a mess of a beautiful situation--our current bull market. We've been hearing since 2012 that the US stock market is overvalued--with the loudest screams coming from academia, CFA's and nobel prize winners. All dead wrong.
As such, if you want to become an elite investor, the answer does not lie within a master's degree from Columbia or by grabbing the well distinguished CFA title (obviously, neither one is going to truly hurt you as an investor, but these accomplishments, while awesome, just do not help as much as we are lead to believe) ... it's about experience, making mistakes, being honest with yourself about said mistakes and maturing in real time as an allocator of capital.
NOTHING can replace getting your hands dirty in the real world, learning the ropes for yourself and discovering who YOU are and where YOUR edge lies as an investor. Everyone is different. And to pretend like some blanket theory from some mass-produced text book is going take you to the highest level you are capable of achieving is hilarious. Get your hands dirty and don't be afraid to look like an idiot sometimes--and trust me, you will.
Obviously a lot of market participants don't care to be elite investors, and just want to DCA into the markets over time and retire with some form of financial comfortability. Nothing wrong with that. But to those who aspire to become great financial investors, here's what I have come to learn in my limited investing career and would like to pass along:
Don't be a sheep. Don't listen to fear mongering. Throw out shitty academic terms like sharpe/sortino ratios (pro tip: vol. is not risk). Do your own work. Create your own spreadsheets. Turn off CNBC. Invest in BUSINESSES; not markets. Read every letter WB has ever written to his shareholders. Listen to Charlie Munger talk about human psychology and why we are all our own worst enemy. Question your fellow investors--the bulls and the bears. Challenge your professors, your peers and your self often (with respect of course). Leave your ego at the door. And crush inflation along the way.
One item I am currently challenging that is being tossed around like a hot potato these days, is that "passive investing" is leading to overvalued equity prices. This is an extremely popular view point right now, and I believe the entire narrative to be false for a multitude of reasons.
Submitted September 19, 2017 at 06:48PM by gghh01 http://ift.tt/2xfSis0
