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Another 25 Things Everyone Should Know About Investing and the Economy

Yesterday I explained how one of my favourite columnists, Morgan Housel wrote a great piece 122 Things Everyone Should Know About Investing and the Economy 

I shared 25 great of his great thoughts here.

Now here’s another 25

  1. “We’re all just guessing, but some of us have fancier math,” writes Josh Brown.
  2. When you think you have a great idea, go out of your way to talk with someone who disagrees with it. At worst, you continue to disagree with them. More often, you’ll gain valuable perspective. Fight confirmation bias like the plague.money-magnet
  3. Try to learn as many investing mistakes as possible vicariously through others. Other people have made every mistake in the book. You can learn more from studying the investing failures than the investing greats.
  4. Bill Bonner says there are two ways to think about what money buys. There’s the standard of living, which can be measured in dollars, and there’s the quality of your life, which can’t be measured at all.
  5. If you’re going to try to predict the future — whether it’s where the market is heading, or what the economy is going to do, or whether you’ll be promoted — think in terms of probabilities, not certainties. Death and taxes, as they say, are the only exceptions to this rule.
  6. According to economist Tim Duy, “As long as people have babies, capital depreciates, technology evolves, and tastes and preferences change, there is a powerful underlying impetus for growth that is almost certain to reveal itself in any reasonably well-managed economy.”
  7.  Study successful investors, and you’ll notice a common denominator: they are masters of psychologyThey can’t control the market, but they have complete control over the gray matter between their ears.
  8. The book Where Are the Customers’ Yachts? was written in 1940, and most people still haven’t figured out that brokers don’t have their best interest at heart.
  9. Harvard professor and former Treasury Secretary Larry Summers says that “virtually everything I taught” in economics was called into question by the financial crisis.
  10. Asked about the economy’s performance after the financial crisis, Charlie Munger said, “If you’re not confused, I don’t think you understand.”
  11. Investment bank Dresdner Kleinwort looked at analysts’ predictions of interest rates, and compared that with what interest rates actually did in hindsight. It found an almost perfect lag. “Analysts are terribly good at telling us what has just happened but of little use in telling us what is going to happen in the future,” the bank wrote. It’s common to confuse the rearview mirror for the windshield.rich
  12. Success is a lousy teacher,” Bill Gates once said. “It seduces smart people into thinking they can’t lose.”
  13. There will be seven to 10 recessions over the next 50 years. Don’t act surprised when they come.
  14. However much money you think you’ll need for retirement, double it. Now you’re closer to reality.
  15. The single best three-year period to own stocks was during the Great Depression. Not far behind was the three-year period starting in 2009, when the economy struggled in utter ruin. The biggest returns begin when most people think the biggest losses are inevitable.
  16. Remember what Buffett says about progress: “First come the innovators, then come the imitators, then come the idiots.”
  17. And what Marty Whitman says about information: “Rarely do more than three or four variables really count. Everything else is noise.”
  18.  Since last July, elderly Chinese can sue their children who don’t visit often enough, according to Bloomberg. Dealing with an aging population calls for drastic measures.
  19.  Someone once asked Warren Buffett how to become a better investor. He pointed to a stack of annual reports. “Read 500 pages like this every day,” he said. “That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.”
  20. In 1989, the CEOs of the seven largest U.S. banks earned an average of 100 times what a typical household made. By 2007, more than 500 times. By 2008, several of those banks no longer existed.money_house
  21.  Two things make an economy grow: population growth and productivity growth. Everything else is a function of one of those two drivers.
  22. The single most important investment question you need to ask yourself is, “How long am I investing for?” How you answer it can change your perspective on everything.
  23.  “Do nothing” are the two most powerful — and underused — words in investing. The urge to act has transferred an inconceivable amount of wealth from investors to brokers.
  24. It’s easy to mistake luck for success. J. Paul Getty said, the key to success is: 1) rise early, 2) work hard, 3) strike oil.
  25. Dan Gardner writes, “No one can foresee the consequences of trivia and accident, and for that reason alone, the future will forever be filled with surprises.”

You may also like to read yesterdays blog: 25 THINGS EVERYONE SHOULD KNOW ABOUT INVESTING AND THE ECONOMY 

Read the full list of 122 Things Everyone Should Know About Investing and the Economy at  Motley Fool



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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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