The 13 Characteristics of a Good Investor

[Midpack]

I shamelessly stole this from Bogleheads. Though there's nothing new that hasn't been shared here before, I thought some here might enjoy this 3 page summary of personal financial planning (link below).

The exec summary (with the essential fundamentals that are hardest to teach IME):

1. Have a plan.
2. Shun complexity and embrace simplicity.
   • "Unfortunately, too many financial professionals make investing more complicated than necessary. Perhaps this is because complexity can act as a smokescreen that hides an advisor's lack of experience, confidence, or perspective." [IMO too many "financial professionals" go to great lengths to make clients think they can't possibly invest successfully themselves - and it works on most people, but it doesn't have to be true]
     
3. Diversification in and among asset classes is the cornerstone of good portfolio design.
4. Be content with market equaling returns.
5. Most stocks under perform the market.
6. Understand the function of bonds in your portfolio.
   • "If you seek greater return [than from bonds], don’t lower the credit quality of the bonds in your portfolio, increase your allocation to stocks."
7. Investor behavior, not investment performance, determines long-term results.
   • "Most investors are doomed to fail because in investing, temperament is more important than intellect. Studies reveal that the average investor receives only a fraction of the stock market’s long-term return because of emotional biases that lead to poor investment decisions." [As W Bernstein found out post 2008, even with his sophisticated wealthy clients]
     
8. Don't chase past performance.
9. Slow and steady wins the race.
10. Shun market timing like Superman shunned kryptonite.
    
    • "Sitting on your hands and not panicking when stocks are declining has proven to be one of the best, and most difficult, investment strategies."
11. Ignore all stock market predictions.
12. Ignore the daily noise on Wall Street.
13. Ignore your neighbors.

"In the end, investing is nothing more than trying to take advantage of probabilities. Prudent financial planning focuses on things as they are today, the most likely scenario for tomorrow and is flexible enough to accommodate changing circumstances. The best way to do this is to implement strategies and investment principles that have stood the test of time. Keep a long-term focus, minimize expenses and taxes, control your emotions, maximize diversification, and stick with your plan. Once you embrace these simple truths you can ignore Wall Street, delete the stock market app from your cellphone and get on with your life."

https://oncoursefp.com/images/Vectors%20June%2021%20final.pdf

 

[Ramen]

Thanks, nice summary. My own version is keep it simple, don’t get greedy, and don’t get scared.

 

[Nick12]

Vanguard Index funds and stay the course

 

[target2019]

I heard that 13 is an unlucky number.

 

[Amethyst]

"Be content with market equaling returns."

Hardest for those who love bragging rights.
Which does not include me.

 

[bclover]

That probably translate as good advice for much of our lives

 

[street]

Those 13 commandments, would of been nice to have 45 years ago when I started out investing.

 

[OldShooter]

... delete the stock market app from your cellphone ...

They have apps for that? Why?

 

[audreyh1]

I like the shun complexity and embrace simplicity advice. That’s a huge deal IMO.

I wish I had figured that out sooner. I’m cleaning up where I can now, 20 years later. Hopefully by our 80s it will be super simple.

Otherwise I did very well on that list from the start of building my retirement portfolio.

 

[bolt]

Those 13 commandments, would of been nice to have 45 years ago when I started out investing.

I recall Harvy Pitt(2001-2003 S.E.C chairman pushed out for his transparency) commenting the 10 commandments only took 2 tablets, and one would surfice vs. something akin to the SEC's 11,000 page policies, regulations, & guidlines puzzled him immensely.
(sarcasm on his part, documented in AMZNs 'Ghost exchange' presentation.

As an aside in contemporanous info a BH's prolific poster pointed out VGs recent papered observations were concluded as :

In Conclusion:

Income-focused investors face increased difficulties in effectively meeting their spending target over time in the current low-yield environment. Low yields on traditional assets can tempt income investors to stretch for yield through a reallocation of the portfolio into assets with higher yields or dividends.

The unintended consequences of this are less diversification and risk that materializes when markets are under stress. The solution is a total-return approach, which, when coupled with a prudent spending rule, gives investors a chance to meet their goals through stable portfolio withdrawals, tax efficiency, and a diversified portfolio matched to their unique risk and return preferences.

And I'd add a well know adage:
'More monies been lost reaching for yield than has been lost at the end of a gun since time began'.
(hardwiredrobbery)

Something like that

Good luck & Best wishes....

 

[jollystomper]

Those 13 commandments, would of been nice to have 45 years ago when I started out investing.

+1

Not until I was almost 40 did I figure out that following those type of "commandments" would be best for me. Fortunately there was still enough runway for me to gain tremendous benefit from them.

 

[jollystomper]

"Be content with market equaling returns."

Hardest for those who love bragging rights.
Which does not include me.

True. I recall at least a dozen "financial advisors" over the years stating essentially that "market equaling returns are for suckers" in trying to convince me to have them manage my money. I am glad that I did not listen to them.

 

[iloveyoga]

Very nice, thank you!

 

[OldShooter]

+1 Not until I was almost 40 did I figure out that following those type of "commandments" would be best for me. Fortunately there was still enough runway for me to gain tremendous benefit from them.

My story almost exactly. I spent about 30 years doing all the dumb stuff that most investors do. Slower learner I guess, but finally I figured it out.

 

[VanWinkle]

Everybody makes Rookie mistakes....... for the first 20 years or so!! Simple is the best lesson I learned, but it took a while.

 

[jimbee]

They have apps for that? Why?

I honestly don't know. I see ads from Fidelity about their great smartphone app and how I can track my investments easily. I don't need to track that closely or often.

 

[audreyh1]

I have those apps, but I rarely look at them.

 

[rodi]

I'm sending this to my sons. Both have small Roths despite being only 18 and 20 with part time jobs. The younger one saves more - but tends to think like a daytrader. But he *sometimes* listens to mom.

 

[OldShooter]

I'm sending this to my sons. Both have small Roths despite being only 18 and 20 with part time jobs. The younger one saves more - but tends to think like a daytrader. But he *sometimes* listens to mom.

I suggest that you send them this link, too: "If You Can" by William Bernstein https://www.etf.com/docs/IfYouCan.pdf (free 16 page download)

 

[ExFlyBoy5]

They have apps for that? Why?

How else are you supposed to trade the "MEME" stocks?!?

 

[OldShooter]

How else are you supposed to trade the "MEME" stocks?!?

Trade? What's that? Oh, wait ... I remember now. We did one of those a couple of years ago and another one last year.

 

[Markola]

I especially like the 3 “Ignore”s at the end. What a relief.

 

[Midpack]

I have those apps, but I rarely look at them.

And the precursor to apps.

When I was young and stupid (started actively trading at 33 yo) I watched CNBC every morning for 45-60 minutes when I was working out, and sometimes in the evening. And I never missed Wall $treet Week with Louis Rukeyser on Friday’s.

Now I know that was all (watch) time wasted. I’d have been better off watching Captain Kangaroo. At least I never acted on any of the “knowledge” I was exposed to on CNBC, though I thought it was important info. Thankfully I wised up when I was about 37 yo, and never looked back…Bogle, Bernstein, YMOYL and MND have shaped my IP ever since for the most part.

 

[audreyh1]

From 1995 to about 2002 I also watched CNBC every weekday morning. And I often watched Louis Rukeyser much earlier than that. Then as we traveled a lot more I watched less and less.

Also by mid to late 2000s I was tired of all the CNBC talking heads. Certainly in 2008 when talking heads were constantly defending bad financial institution behavior. And after 2008 it became much more aggressively political.

I did like Mark Haines RIP.

I have the CNBC app on my devices because it’s handy and complete. I have a long watch list which is mostly various indexes. But I rarely even look at it these days. Apple News app will send me to a CNBC story now and then. I haven’t watched any TV or radio news in years.

 

[ExFlyBoy5]

From 1995 to about 2002 I also watched CNBC every weekday morning. And I often watched Louis Rukeyser much earlier than that. Then as we traveled a lot more I watched less and less.

Also by mid to late 2000s I was tired of all the CNBC talking heads. Certainly in 2008 when talking heads were constantly defending bad financial institution behavior. And after 2008 it became much more aggressively political.

I did like Mark Haines RIP.

I have the CNBC app on my devices because it’s handy and complete. I have a long watch list which is mostly various indexes. But I rarely even look at it these days. Apple News app will send me to a CNBC story now and then. I haven’t watched any TV or radio news in years.

I made the mistake of watching a couple of days ago. About about 2 minutes into me watching it, Rick Santelli lost his ever loving mind and was YELLING and arguing with Scott Wapner. I couldn't get the TV turned off fast enough!