What is the single most important investing belief?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Topic Author
umfundi
Posts: 3361
Joined: Tue Jun 07, 2011 5:26 pm

What is the single most important investing belief?

Post by umfundi »

I've been contemplating this question over the holidays: So, I have developed some kind of belief system around investing. Which tenet is the most important?

I think it is the belief that markets are efficient. Not perfectly efficient, but efficient enough that I cannot hope to recognize and take advantage of any inefficiencies.

From this belief one must conclude that the price of everything reflects all available knowledge. I cannot know something that would affect the price that everyone else does not know.

The only rational response to this is to diversify. How to diversify? The only way I know is to look at history (yes, back test) and economic theories like the Efficient Frontier and Modern Portfolio Theory.

All this has not caused me to behave much differently, but I sure sleep better and worry less.

The key realization here, for me, is that so much of the debate in these forums really hinges on some manifestation of prediction or market timing, no matter how cleverly disguised. Or, that some people can use the same data to identify opportunities that everyone else is oblivious to.

Invest in TIPS! Dollar-Cost Average! What to do about the Euro crisis? Will Social Security disappear? Well, by all means,understand these issues, but there is nothing special you, as an individual can or should do. Recognize that each presumed crisis / opportunity rests on some prediction or assumption on the direction of future events. All those risks are accounted for in current prices. The best, most optimum thing you can do is spread your bets.

There are other elements that make up my belief system and govern my behaviors, but I was surprised to figure out how much derives from a belief in efficient markets.

To Prof. Dr. Burton Malkiel, my profound gratitude. (In spite of his recent tendencies to prediction.)

Best wishes, and Happy New Year.

You've all taught me a lot.

Keith
Déjà Vu is not a prediction
User avatar
PaddyMac
Posts: 1808
Joined: Fri Jul 09, 2010 10:29 pm

Re: What is the single most important belief?

Post by PaddyMac »

Don't Panic. In nice big friendly letters.

That's all I got out of last year...
yobria
Posts: 5978
Joined: Mon Feb 19, 2007 10:58 pm
Location: SF CA USA

Re: What is the single most important belief?

Post by yobria »

I couldn't agree more. And anyone who proposes investing based on market inefficiencies (active management, market timing, free lunches, etc) either:

a) Has something to sell you or
b) Has been duped by the hope of easy money

Nick
User avatar
William Million
Posts: 1130
Joined: Wed May 05, 2010 4:41 am
Location: A Deep Mountain

Re: What is the single most important belief?

Post by William Million »

In the long run (and sometimes it can take 20 years), an investment in the U.S. economy (through a broad stock fund) will pay off.
User avatar
Qtman
Posts: 414
Joined: Sun Jun 29, 2008 8:00 pm
Location: Town with no name

Re: What is the single most important belief?

Post by Qtman »

Those that beat the averages over time are about zero, therefore go for the average with minimal costs.
Don’t wear yourself out trying to get rich; be wise enough to control yourself. | Wealth can vanish in the wink of an eye. It can seem to grow wings and fly away | like an eagle. - King Solomon
kenner
Posts: 3128
Joined: Sat Mar 01, 2008 7:45 am

Re: What is the single most important belief?

Post by kenner »

The single most important belief may simply be that "Self-Education" is paramount as to all aspects of investing (diversification, planning, taxation, costs etc.).
Brody
Posts: 983
Joined: Wed Oct 19, 2011 8:21 am

Re: What is the single most important investing belief?

Post by Brody »

I've been contemplating this question over the holidays: So, I have developed some kind of belief system around investing. Which tenet is the most important?

Active investing vs. Passive Investing
Roth IRA vs. Traditional
Stocks vs. Mutual Funds
Stocks vs. Bonds
Bonds vs. Bond Funds
Active Funds vs Passive Funds
Savings vs. investing
Savings vs. paying off debt
taxable vs. tax deferred
domestic vs. foreign
allocation A vs. allocation B
load vs. no load
advisor vs. DIY
lump sum vs. DCA
Real estate vs. equities
Equities vs investing in one's own business
????? vs ??????

Everything that I can think of pales in comparison to:
"What matters most is the amount of money that is put away."

In my experience, regardless of the specifics, the following is usually true:
1)People who put away 10% of their income do fine.
2)People who put away 20% of their income thrive.
3)People who put away 30% of their income become relatively wealthy.
I am the poster formerly known as Oneanddone.
User avatar
William Million
Posts: 1130
Joined: Wed May 05, 2010 4:41 am
Location: A Deep Mountain

Re: What is the single most important investing belief?

Post by William Million »

Brody wrote:

In my experience, regardless of the specifics, the following is usually true:
1)People who put away 10% of their income do fine.
2)People who put away 20% of their income thrive.
3)People who put away 30% of their income become relatively wealthy.
Amazingly true.
User avatar
3CT_Paddler
Posts: 3485
Joined: Wed Feb 04, 2009 4:28 pm
Location: Marietta, GA

Re: What is the single most important investing belief?

Post by 3CT_Paddler »

For me it all boils down to this... over an investing lifetime, costs matter.

The market may or may not be completely efficient, but it takes truly terrific long term performance to beat the market after costs over a 40 year or longer period. That extra 2% or more every year puts an active manager at an extreme disadvantage in the long term. Instead of wasting time/effort trying to find a great deal (trying to find the next Google, Amazon, IBM), take the market price and spend your time on more enriching pursuits.
stlutz
Posts: 5585
Joined: Fri Jan 02, 2009 12:08 am

Re: What is the single most important investing belief?

Post by stlutz »

[quote]I think it is the belief that markets are efficient. Not perfectly efficient, but efficient enough that I cannot hope to recognize and take advantage of any inefficiencies.[/quote]

Actually, I'd reconsider. Even if markets aren't efficient, there is still the fact that only 1/2 of the market could "beat" the market, and it would be even less than that after costs and after taxes.

A boglehead approach to investing really isn't dependent upon the EMH. It really just depends upon pretty basic math.
maxfax
Posts: 422
Joined: Thu Mar 11, 2010 11:28 am

Re: What is the single most important investing belief?

Post by maxfax »

I believe pure luck is the most important factor determining results.
Just like scientists say that 'eureka moments only happen to the well-prepared mind', so too savings $$ allows you to capitalize on luck when it happens.
But then, my own savings habits were formed in (and by) the era a double-digit yields from government-insured term deposits ... so of course that was pure luck as well.
Last edited by maxfax on Thu Jan 05, 2012 10:21 am, edited 1 time in total.
User avatar
Midpack
Posts: 778
Joined: Fri Mar 14, 2008 9:34 am
Location: NC

Re: What is the single most important investing belief?

Post by Midpack »

umfundi wrote:Invest in TIPS! Dollar-Cost Average! What to do about the Euro crisis? Will Social Security disappear? Well, by all means, understand these issues, but there is nothing special you, as an individual can or should do. Recognize that each presumed crisis / opportunity rests on some prediction or assumption on the direction of future events. All those risks are accounted for in current prices. The best, most optimum thing you can do is spread your bets.

Keith
I pretty much agree with the OP, and I think the underlined may be the most overlooked aspect of investing. I've done (slightly) better than average after expenses as a long time Bernstein/Bogle follower, as expected. Too many people come to me and just want me to tell them what to buy, they don't want to 'understand the issues.' And when the market takes the inevitable periodic dive, they panic and sell, so I never make any recommendations, not even to family.

Having the ability to not lose your head during market and/or economic excursions is key, and IMO that only comes from understanding market history, asset classes & allocation, etc. I know exactly why I own every fund and why my chosen AA, and no one should do otherwise IMO, but most aren't interested in knowing 'why.' So when funds/classes rise and fall I'm not usually (overly) surprised and I can sleep at night. I've ridden out '87, '00 (not a surprise at the time) and '08 - maybe a little discouraged, but I never sold out, in fact I bought in. This comes from understanding, The Four Pillars of Investing by Bernstein is one of several books that I think can provide the necessary knowlege. There are far too many other flashy 'get rich quick' books that will lead investors astray IMO.

I think the discussions here no matter how far fetched they may seem at times, are instructive and worthwhile in that they test our knowledge and thereby strengthen our understanding. The more I know, the better I sleep and just live life. And I hope I will always continue to learn. YMMV
Last edited by Midpack on Thu Jan 05, 2012 10:33 am, edited 1 time in total.
You only live once...
jon-nyc
Posts: 927
Joined: Sun Nov 15, 2009 8:02 am
Location: New York

Re: What is the single most important investing belief?

Post by jon-nyc »

umfundi wrote: I cannot know something that would affect the price that everyone else does not know.

Of course you can, you just probably don't.
User avatar
prudent
Moderator
Posts: 9079
Joined: Fri May 20, 2011 2:50 pm

Re: What is the single most important belief?

Post by prudent »

William Million wrote:In the long run (and sometimes it can take 20 years), an investment in the U.S. economy (through a broad stock fund) will pay off.
I agree it comes down to this with respect to the most important belief. If you don't believe this to be true, there's no point to investing. Just put your money in the bank and watch inflation eat up your assets.
Brody
Posts: 983
Joined: Wed Oct 19, 2011 8:21 am

Re: What is the single most important belief?

Post by Brody »

prudent wrote:
William Million wrote:In the long run (and sometimes it can take 20 years), an investment in the U.S. economy (through a broad stock fund) will pay off.
I agree it comes down to this with respect to the most important belief. If you don't believe this to be true, there's no point to investing. Just put your money in the bank and watch inflation eat up your assets.

It would be easy to agree except for the fact that there are many people who have done very well for themselves being very conservative, staying away from debt and consistently putting money in the bank.

Take the last 20 years or any time period that you would like. Let one person put their money into the bank. Let the other put their money in the stock market. Which one will do better? My pick is whichever one put away more money.

My observational experience is that savers can do very well. Investors can do very well. The ones who don't do well are those who go back and forth between the two.
I am the poster formerly known as Oneanddone.
VennData
Posts: 580
Joined: Mon Feb 26, 2007 4:52 pm

Re: What is the single most important investing belief?

Post by VennData »

Nobody knows shoot.

implying (touched on above:) I can do BETTER than average if I use low-cost index funds, since I pay less costs. ...and reduce my risk with a sensible asset allocation (aka diversification) and by re-balancing, maintain that risk profile.
Fallible
Posts: 8795
Joined: Fri Nov 27, 2009 3:44 pm

Re: What is the single most important investing belief?

Post by Fallible »

3CT_Paddler wrote:For me it all boils down to this... over an investing lifetime, costs matter.

The market may or may not be completely efficient, but it takes truly terrific long term performance to beat the market after costs over a 40 year or longer period. That extra 2% or more every year puts an active manager at an extreme disadvantage in the long term. Instead of wasting time/effort trying to find a great deal (trying to find the next Google, Amazon, IBM), take the market price and spend your time on more enriching pursuits.
After 24 years in the market, I'm thinking more and more that it does indeed boil down to costs. That's why it's important to say low-cost index funds, not just index funds ( which may not always be low cost). Once investors educate themselves on the costs of actively-managed funds versus good low-cost index funds, cost would, or should, be the main determinant.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
TJSI
Posts: 401
Joined: Thu Jan 27, 2011 3:03 pm

Re: What is the single most important investing belief?

Post by TJSI »

Most important investing belief: That John Bogle gives very good advice.
grok87
Posts: 10512
Joined: Tue Feb 27, 2007 8:00 pm

Re: What is the single most important investing belief?

Post by grok87 »

Interesting thread. Not sure I could narrow it down to a single most important investing belief personally. But here are 10:
http://www.bogleheads.org/forum/viewtop ... 10&t=87293
cheers,
RIP Mr. Bogle.
User avatar
bob90245
Posts: 6511
Joined: Mon Feb 19, 2007 7:51 pm

Re: What is the single most important investing belief?

Post by bob90245 »

William Million wrote:
Brody wrote:
In my experience, regardless of the specifics, the following is usually true:
1)People who put away 10% of their income do fine.
2)People who put away 20% of their income thrive.
3)People who put away 30% of their income become relatively wealthy.
Amazingly true.
Yes, this is my vote for The Single Most Important Investing Belief.

Savings rate is more important than earning a high rate on what's been saved. At least until you reach Critical Mass (i.e. the big pile you're aiming for when retired). But at that point, you're more concerned with capital preservation rather than making an already big pile even bigger.
Ignore the market noise. Keep to your rebalancing schedule whether that is semi-annual, annual or trigger bands.
swaption
Posts: 1245
Joined: Tue Jul 29, 2008 11:48 am

Re: What is the single most important investing belief?

Post by swaption »

The only free lunch is diversification.
Topic Author
umfundi
Posts: 3361
Joined: Tue Jun 07, 2011 5:26 pm

Re: What is the single most important investing belief?

Post by umfundi »

grok87 wrote:Interesting thread. Not sure I could narrow it down to a single most important investing belief personally. But here are 10:
http://www.bogleheads.org/forum/viewtop ... 10&t=87293
cheers,
grok,

I agree completely, but I think these are actions that flow from some overarching beliefs that you have not expressed.

===========

Thank you all, an interesting thread.

My original post was perhaps just a rationalization (for myself) of why I behave the way I do. And, my justification of a system or collection of beliefs that I think is self-consistent and rational.

Best wishes,

Keith
Déjà Vu is not a prediction
Topic Author
umfundi
Posts: 3361
Joined: Tue Jun 07, 2011 5:26 pm

Re: What is the single most important investing belief?

Post by umfundi »

jon-nyc wrote:
umfundi wrote: I cannot know something that would affect the price that everyone else does not know.
Of course you can, you just probably don't.
jon,

I was expressing a belief, not a fact. Aside from inside information, I can't imagine what I may know that others don't.

And, since I am risk averse (don't want to go to jail), leveraging inside information is not in my investment paradigm. :wink:

Best wishes,

Keith
Déjà Vu is not a prediction
User avatar
magician
Posts: 1571
Joined: Mon May 02, 2011 1:08 am
Location: Yorba Linda, CA
Contact:

Re: What is the single most important investing belief?

Post by magician »

stlutz wrote:. . . only 1/2 of the market could "beat" the market . . . .
I know what you mean, but this statement isn't true. If the market return is, say, 5%, you can have 90% of the people earn, say, 6% and 10% of the people earn -4%; 90% of the people have beaten the market.
Simplify the complicated side; don't complify the simplicated side.
User avatar
celia
Posts: 16764
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: What is the single most important investing belief?

Post by celia »

I think the most important investing belief is that you should DIVERSIFY.

That means hold different kinds of assets that are not correlated to each other. That means invest in the same asset over a period of time (dollar-cost averaging) so that some shares cost less than others, regardless of your time-frame. Invest in tax-deferred, post-tax (Roth) and currently taxed assets and take advantage of different tax rates depending what is in effect for any given year and what your situation is in any given year. Invest in yourself (and family), your own business, no more than 5% of your assets in stock for the company you work for. Invest in Social Security, a pension, and personal assets set aside for retirement, an emergency fund, and even charity.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
User avatar
magician
Posts: 1571
Joined: Mon May 02, 2011 1:08 am
Location: Yorba Linda, CA
Contact:

Re: What is the single most important investing belief?

Post by magician »

I think that the most important investing belief is that, eventually, I will get my money back.
Simplify the complicated side; don't complify the simplicated side.
User avatar
magician
Posts: 1571
Joined: Mon May 02, 2011 1:08 am
Location: Yorba Linda, CA
Contact:

Re: What is the single most important investing belief?

Post by magician »

umfundi wrote:. . . I am risk averse (don't want to go to jail) . . . .
It sounds as though you are more punishment averse than risk averse.
Simplify the complicated side; don't complify the simplicated side.
User avatar
Rick Ferri
Posts: 9703
Joined: Mon Feb 26, 2007 10:40 am
Location: Georgetown, TX. Twitter: @Rick_Ferri
Contact:

Re: What is the single most important investing belief?

Post by Rick Ferri »

Maintaining discipline through thick and thin is the key to investment success.

Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
snyder66
Posts: 1055
Joined: Tue Feb 02, 2010 11:46 am

Re: What is the single most important investing belief?

Post by snyder66 »

I thing saving should be first above everything else. A million dollars cash is still a million dollars when compared with someone who didn't save as much. Pick any number to plug in...I think that overall expenses of investment vehicle is second. Followed by return and all of the rest.
User avatar
nisiprius
Advisory Board
Posts: 52105
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: What is the single most important investing belief?

Post by nisiprius »

1) "You can't cheat an honest man."

(This is related to the way con artists work. In almost every con, the mark believes he the beneficiary of some kind of shady deal. That's why they don't ask questions--and why they don't press if the con artist reacts with anger to the questions they do ask. Bernard Madoff's clients believed he was front-running his firm's brokerage clients on their behalf. If you ever saw the movie The Sting, the mark believes that the con artists have a partner in the Western Union office who is cheating by telegraphing horse race winners first, before sending the results to bookmakers.)

2) "If it looks too good to be true, it is."
Last edited by nisiprius on Thu Jan 05, 2012 6:59 pm, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Van
Posts: 1006
Joined: Wed Oct 27, 2010 9:24 am

Re: What is the single most important investing belief?

Post by Van »

Do NOT loose capital.
User avatar
joe8d
Posts: 4544
Joined: Tue Feb 20, 2007 7:27 pm
Location: Buffalo,NY

Re: What is the single most important investing belief?

Post by joe8d »

snyder66 wrote: I thing saving should be first above everything else. A million dollars cash is still a million dollars when compared with someone who didn't save as much. Pick any number to plug in...I think that overall expenses of investment vehicle is second. Followed by return and all of the rest.
:thumbsup You nailed it.
All the Best, | Joe
User avatar
novastepp
Posts: 340
Joined: Sun Apr 03, 2011 8:13 pm
Location: Indiana

Re: What is the single most important investing belief?

Post by novastepp »

Take the time to invest in yourself.
User avatar
Taylor Larimore
Posts: 32839
Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

Xingle most important investing belief?

Post by Taylor Larimore »

umfundi:
Most Important Investment Belief?
Author Bill Bernstein came close when he wrote:

"When I disagree with Jack Bogle, I am usually wrong."

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Fallible
Posts: 8795
Joined: Fri Nov 27, 2009 3:44 pm

Re: What is the single most important investing belief?

Post by Fallible »

snyder66 wrote:I thing saving should be first above everything else. A million dollars cash is still a million dollars when compared with someone who didn't save as much. Pick any number to plug in...I think that overall expenses of investment vehicle is second. Followed by return and all of the rest.
In an earlier reply here I agreed with another poster that investment costs are most important in deciding on good low-cost index funds versus actively-managed funds. I didn't think of savings as investing, i.e., investing in the market, but rather as saving money, some of which would be in the market and the rest for other things. But generally speaking, I think there's no question that saving is the most important thing you can do with your money. That's where it should all start.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
Topic Author
umfundi
Posts: 3361
Joined: Tue Jun 07, 2011 5:26 pm

Re: Xingle most important investing belief?

Post by umfundi »

Taylor Larimore wrote:umfundi:
Most Important Investment Belief?
Author Bill Bernstein came close when he wrote:

"When I disagree with Jack Bogle, I am usually wrong."

Best wishes.
Taylor
Taylor, that is great!

I will add:
Even when I think I agree with Jack Bogle, I am probably not quick enough, nor smart enough, to take advantage of everything he says
By the way, the emphasis on savings rate by so many responders is a surprise to me. I completely agree, but it was so innate that I would not have expressed it as a basic tenet. I think I am prepared to concede #1.

Keith
Déjà Vu is not a prediction
Johm221122
Posts: 6372
Joined: Fri May 13, 2011 6:27 pm

Re: What is the single most important investing belief?

Post by Johm221122 »

Save early save often
tms
Posts: 400
Joined: Mon Dec 15, 2008 10:44 am

Re: What is the single most important investing belief?

Post by tms »

For me it all boils down to this... over an investing lifetime, costs matter.
Hmmm, someone can get their costs down to zero by only putting money in CD's, and save those 10 or 20 basis points that Vanguard charges.
User avatar
Culture
Posts: 248
Joined: Mon Nov 17, 2008 8:49 am
Location: Greater Houston, Texas

Re: What is the single most important belief?

Post by Culture »

William Million wrote:In the long run (and sometimes it can take 20 years), an investment in the U.S. economy (through a broad stock fund) will pay off.
Came here to find this statement, left satisfied.
plnelson
Posts: 720
Joined: Wed Feb 24, 2010 5:49 pm

Re: What is the single most important investing belief?

Post by plnelson »

I think it is to recognize that the future is unknowable. Markets, prices, demand, etc, cannot be predicted. You should not buy stock on the assumption that it will go up, or on the assumption that one asset class, e.g., stocks, will do any better than any other asset class, e.g., bonds.
HongKonger
Posts: 1079
Joined: Tue Jun 21, 2011 10:35 am
Location: Deep in the Balkans

Re: What is the single most important investing belief?

Post by HongKonger »

I disagree with "I cannot know something that would affect the price that everyone else does not know."

I have held press conferences whereby the news I have delivered has pushed a stock price up in a single day by close to 10%.
User avatar
FabLab
Posts: 1127
Joined: Mon Oct 18, 2010 12:15 pm

Re: What is the single most important investing belief?

Post by FabLab »

Brody wrote: Everything that I can think of pales in comparison to:
"What matters most is the amount of money that is put away."
The only "magic formula" I know. For me, nothing else comes close.
The fundamental things apply as time goes by -- Herman Hupfeld
DartThrower
Posts: 958
Joined: Wed Mar 11, 2009 4:10 pm
Location: Philadelphia

Re: What is the single most important investing belief?

Post by DartThrower »

Although I agree that saving is crucially important to successfully building wealth, I don't consider saving to be investment. Saving is the enabler of investment. The combination of those two gives an investor a shot at attaining a desired amount of wealth.

I'd like to add the concept of humility to the other responses in this thread. Personally I believe our society used to consider humility to be a virtue and its opposite, arrogance, to be a vice. For some reason today the roles are reversed and arrogance is seen more as a virtue. An arrogant investor may believe that he/she can beat the market or that a well chosen adviser can on the investor's behalf. The media of course has a key role in projecting this arrogance upon us. Jack Bogle along with many many in the academic community have carefully looked at the issues of investing and have come to the humbling conclusion that trying to beat the market will lead to unfavorable results for the large majority of investors.

To say that we don't know the future, or that we as individuals are not likely to be able to beat the market other than by luck, is a humbling exercise indeed. Do we have the humility to accept only "our fair share" of returns the markets offer us in the future, or does arrogance push us over to the other side?
After one has played a vast quantity of notes and more notes, it is simplicity that emerges as the crowning reward of art. Chopin
Default User BR
Posts: 7502
Joined: Mon Dec 17, 2007 6:32 pm

Re: What is the single most important investing belief?

Post by Default User BR »

Van wrote:Do NOT loose capital.
Cage it up!


Brian
User avatar
Cloud
Posts: 662
Joined: Wed Sep 12, 2007 12:43 pm

Re: What is the single most important investing belief?

Post by Cloud »

That the market will continue to rise in the long run.
User avatar
Rick Ferri
Posts: 9703
Joined: Mon Feb 26, 2007 10:40 am
Location: Georgetown, TX. Twitter: @Rick_Ferri
Contact:

Re: What is the single most important investing belief?

Post by Rick Ferri »

.


Discipline!



.
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
natureexplorer
Posts: 4207
Joined: Thu Sep 03, 2009 10:52 am
Location: Houston

Re: What is the single most important investing belief?

Post by natureexplorer »

Diversification.
james22
Posts: 1992
Joined: Tue Aug 21, 2007 2:22 pm

Re: What is the single most important investing belief?

Post by james22 »

Valuation matters.
User avatar
NAVigator
Posts: 2544
Joined: Tue Feb 27, 2007 6:24 am
Location: Iowa

Re: What is the single most important investing belief?

Post by NAVigator »

Living below your means. Without this, saving is not possible. Without savings, investing is not advisable. From this simple practice, all subsequent investing beliefs are just refinements.

Jerry
"I was born with nothing and I have most of it left."
DartThrower
Posts: 958
Joined: Wed Mar 11, 2009 4:10 pm
Location: Philadelphia

Re: What is the single most important investing belief?

Post by DartThrower »

NAVigator wrote:Living below your means. Without this, saving is not possible. Without savings, investing is not advisable. From this simple practice, all subsequent investing beliefs are just refinements.

Jerry
Well put. The original topic was "What is the single most important investing belief?". If you define investing as any action someone takes to build wealth for the future then I would have to agree. We can invest in our future by living below our means today.

I think most people have a somewhat narrower concept of investing as just one particular aspect of the wealth building process, and that is to take existing and future savings (more or less as a given) and use them to achieve future financial goals. Investment refers to how the savings is used.
After one has played a vast quantity of notes and more notes, it is simplicity that emerges as the crowning reward of art. Chopin
Post Reply