Every writer knows that trying to express an idea in the fewest number of words is one of the hardest tasks. That is, in part, why there are editors. There is a legend that Ernest Hemingway won a bet by writing a six word short story:
For sale. Baby shoes. Never worn.
The folks at Snopes are skeptical of this legend, but the fact remains that the six word story is a compelling one, Hemingway or not.
Jason Zweig writing at Total Return asked a number of investment professionals to do something similar when it comes to expressing their investment philosophy in ten words or less. One might think that ten words would be too much of a constraint, but the participants did compelling work. Zweig wrote this:
Anything is possible, and the unexpected is inevitable. Proceed accordingly.
We also liked Elroy Dimson’s contribution as well:
Risk means more things can happen than will happen.
It is a useful exercise for every investor to undertake. We have previously noted that every trader needs to first have a trading plan that is simple as possible and includes a checklist. You can think of this exercise as the further distillation of this exercise. So here is our first crack at a
ten, eight word investment philosophy:
Diversify widely, rebalance regularly, minimize costs: rinse, repeat.
Here is another more philosophical version.
You are more risk-averse than you think you are.
In any event it is a useful exercise for any investor to undertake. It forces you to really think about those things that truly important to your investing. If you have one you would like to share with Abnormal Returns readers please feel free to leave it as a comment below.
Baby shoes. (Snopes)
The business of trading. (Abnormal Returns)
Can you sum up your investment philosophy in 10 words? (Total Return)