Abnormal Returns is on hiatus this week. However that does not mean that we are content-free. As we have done in previous years we asked a panel of highly respected independent finance bloggers a series of (hopefully) provocative questions. Yesterday’s edition focused on whether demographic trends will lead to poor future equity returns. Below you can see the blogger’s name, blog name and Twitter/StockTwits handle. We hope you enjoy these posts as we do.
Question: The financial media (and blogosphere) are not really set up to provide novice investors with clear, competent advice. If you had only one piece of advice for a novice investor what would it be? (Answers in no particular order.)
If I had only one piece of advice for the novice investor, it would be: seek out conflicting opinions not conforming opinions. Do your best to avoid confirmation bias.
My advice to novice investors is to know what it means to invest in yourself. That means taking the time to accumulate knowledge, staying open-minded, learning from mistakes and remembering not to confuse building wealth with building a life.
Read the Intelligent Investor. Call up Vanguard. Or start following your blog to get educated. Once they are ready to digest the deluge of more sophisticated financial market research, they can head over to our free ideas site or CXOadvisory.com
Turn it all off. All of it. Then spend a few years putting your dollars to work. Real dollars. Not necessarily big dollars, just real dollars. See what works for you and what doesn’t. Step outside of yourself and observer how you react to financial success and more importantly, failure. Then when you’ve created your a solid, self-made foundation of financial knowledge, slowly dial the noise back up, but ruthlessly vet everything you consume. Garbage in, garbage out.
Unless novice investors intend to become experience, knowledgeable investors, put your money into a Wealthfront-type program or find someone you trust to manage for you. That’s not a knock, and in fact it’s never been easier to become an expert investor with all the cheap tools and information out there. I’m 32 now and opened my first trading account in August, 2000 (at the peak) at age 19. If you averaged it out I’ve probably spent 10 hours a day for the past 13 years thinking about markets and economies, so that’s almost 50,000 hours in Gladwell-speak. This endeavor is challenging financially, intellectually, and emotionally, and at least for the way I’m wired I haven’t found a way to just dabble and feel confident in my process.
Determine a simple plan that fits your basic needs and stick with it, ignoring news and events.
Don’t believe the hype from investment professionals or the media or the blogosphere: Chasing basis points is not the most important thing for you to do. Saving and sound financial planning are likely to be much more powerful in most environments — and they can be relied upon. The markets may or may not deliver what you expect or hope.
You can’t beat the market. The market is always smarter on a daily basis, yearly basis than any one person. There are times you can win, but they are rare-and you must have some insight or inside information the rest of the market doesn’t have.
Start investing early (and save a lot).
Read “Simple Wealth, Inevitable Wealth” by Nick Murray. After that, spend less, invest more, invest globally, avoid debt, and be patient.
Don’t set out to become the world’s greatest investor. It’s an unrealistic goal. A worthy and achievable goal is to not become the world’s worst investor. Take what the market gives you for returns and save at least a double-digit percentage of your salary.
Books > articles
Meetings > blog posts
Conferences > Twitter
Thanks to everyone for their participation. Stay tuned for another question tomorrow.