What is your greatest weakness as an investor?

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letsgobobby
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What is your greatest weakness as an investor?

Post by letsgobobby » Fri Nov 23, 2012 3:41 pm

What's your biggest blind spot? Thinking over your investing lifespan, where might you make a costly mistake? (Known unknown)

At the second degree of analysis, if you can, what is the weakness you're not aware of, but which might hurt you nonetheless? (Unknown unknown)

To the first, I'd answer that I might not know when enough is enough. That I might leave risk on when I no longer need to. There ate some putative psychological (oedipal) reasons for this but those are not here or there.

To the second, maybe overconfidence. Perhaps related to the first.

How about you?

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Re: What is your greatest weakness as an investor?

Post by livesoft » Fri Nov 23, 2012 3:48 pm

I am extremely overconfident. There. I wrote it.
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Taylor Larimore
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Greatest weakness(es)

Post by Taylor Larimore » Fri Nov 23, 2012 4:00 pm

Hi Bobby:
What is your greatest weakness as an investor?
You ask a very good question. A good investor needs to know what they don't know (which is at least 95% of the financial information available).

I have many weeknesses but I think my biggest weakness is my inability to keep up with various retirement, health and educational plans and how and when to switch between them and the tax ramifications involved.

Fortunately, there is not much a successful investor needs to know. This is an example:

The Three Fund Portfolio

Very often the most knowledgeable investors are the worst investors. Long Term Capital Management comes to mind.

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: What is your greatest weakness as an investor?

Post by stan1 » Fri Nov 23, 2012 4:06 pm

Known unknown:
For me it is a natural instinct to be a conservative investor.
My first choice would be a 100% allocation to FDIC insured CDs (if I thought I could get by with that).

Unknown unknown:
A black swan that destroys everything I've worked hard and sacrificed for (and whether I react quickly enough to it given that I'm a conservative investor, if you want it to be something behavioral). So, yes, in my case it does come back to the same underlying potential weakness.
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Re: What is your greatest weakness as an investor?

Post by hazlitt777 » Fri Nov 23, 2012 4:07 pm

Perhaps boredom is my greatest weakness. This generates the need to find something interesting and new, leading to the temptation to "do something" which can result in violating my portfolio allocation strategy, or needlessly complicating it.

I am fighting this temptation right now:>(

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Re: What is your greatest weakness as an investor?

Post by peppers » Fri Nov 23, 2012 4:25 pm

It's been said around here before. The more I learn, the less I know. I spent part of this morning perusing IRS Pub 590 and IRS Pub 575. Why? It's not work related. I just know something is in there that I am not aware of.
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Re: What is your greatest weakness as an investor?

Post by nisiprius » Fri Nov 23, 2012 4:35 pm

letsgobobby wrote:What's your biggest blind spot? Thinking over your investing lifespan, where might you make a costly mistake? (Known unknown)

At the second degree of analysis, if you can, what is the weakness you're not aware of, but which might hurt you nonetheless? (Unknown unknown)
Well, if I knew what they were, I wouldn't have them. (I'd have some other weakness).

I am almost certainly too conservative an investor, although not much too conservative.

The biggest single investing mistake I made, except that I do not feel it was a life mistake, was getting a late start. That was far more consequential than anything else I've done. I spent nine years in grad school--in my department, there were students that were in grad school longer, but I believe I hold the record for longest time spent and actually ultimately getting a degree. So I did not get a real job until I was about thirty, and did not being serious retirement savings until a couple of years later.

Still, it was a wonderful time and I met my wife there.
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.

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Re: What is your greatest weakness as an investor?

Post by Call_Me_Op » Fri Nov 23, 2012 4:43 pm

My biggest mistake was getting started late. I was way too conservative during the great bull market in stocks. Better late than never, though. :happy
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Re: What is your greatest weakness as an investor?

Post by pennstater2005 » Fri Nov 23, 2012 5:17 pm

My greatest weakness as an investor is I am constantly thinking about changing my asset allocation. Why? Don't know. I like where I'm at now 80/20, but sometimes wish I was slightly more aggressive. I got a later start and feel like I need to make up ground. But then my inner-bogle kicks in and I realize….hey idiot, stay the course.
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Re: What is your greatest weakness as an investor?

Post by staythecourse » Fri Nov 23, 2012 6:06 pm

hazlitt777 wrote:Perhaps boredom is my greatest weakness. This generates the need to find something interesting and new, leading to the temptation to "do something" which can result in violating my portfolio allocation strategy, or needlessly complicating it.

I am fighting this temptation right now:>(
Agree 100%. I'm at my investing best when I get so busy in my life (not too hard now with a new baby). When I'm busy I don't think about tinkering with the plan. I barely have enough time to invest new $$ every month into my allocation.

Good luck.
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Re: What is your greatest weakness as an investor?

Post by scone » Fri Nov 23, 2012 8:54 pm

My hyper-conservatism fights with my urge to tweak the portfolio. So I end up doing little or nothing, but without the mental serenity that should follow. :oops:
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Re: What is your greatest weakness as an investor?

Post by pkcrafter » Fri Nov 23, 2012 9:10 pm

I don't strive for maximum returns. Even worse, I don't care what the other guy is getting -sigh- :(

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Re: What is your greatest weakness as an investor?

Post by mhc » Fri Nov 23, 2012 9:18 pm

My greatest weakness is probably overly aggressive. I'm not hyper-aggressive, but I am about age-25 on bonds.

If I have a blind spot, it might be deferring too much. I just hate to pay taxes. If taxes go up a lot in the future, I could get hit hard in retirement.

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Re: What is your greatest weakness as an investor?

Post by tetractys » Fri Nov 23, 2012 9:34 pm

I invest too much too soon sometimes. At one point this caused me to sell stock when I found I had to buy a car. Just recently I just eked by and only had to move a few hundred from my investment account for rent. What I should do of course is build up a reserve account for such times; but alas, I am weak. -- Tet

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Re: What is your greatest weakness as an investor?

Post by Juniormint » Fri Nov 23, 2012 9:53 pm

That I may be overdoing it in the sense that hey, you know what, it's okay to spend money on things I enjoy more instead of saving/investing more.

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Re: What is your greatest weakness as an investor?

Post by nedsaid » Fri Nov 23, 2012 9:57 pm

I have at least two weaknesses as an investor.

One is not leaving well enough alone. The temptation to "tinker" and try to improve the portfolio is great. If you have a good investment plan and own good investments, you don't need to constantly tinker. The more you trade, the less your returns.

Number two is getting too attached to my investments. This is particularly true with individual stocks. This is why this forum discourages investments in individual stocks.

If you invest in index funds, you can get around one and two.
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Re: What is your greatest weakness as an investor?

Post by Tortoise » Fri Nov 23, 2012 10:17 pm

I'm becoming my dad in the sense that I squirrel away money into our brokerage account before anyone else (i.e., my wife) sees it. I do tell her how much we have in total every week or so, so it's not like I'm hiding anything. :happy

As far as unknown unknowns, I know I won't live a long time, due to cancer, but no one knows how long I've got. So we keep saving and living our lives as we always have, and hope I might live a long time.
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Re: What is your greatest weakness as an investor?

Post by Default User BR » Fri Nov 23, 2012 10:26 pm

I was going to say procrastination, but I didn't get around to it.


Brian

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Re: What is your greatest weakness as an investor?

Post by CABob » Fri Nov 23, 2012 11:31 pm

Default User BR wrote:I was going to say procrastination, but I didn't get around to it.
I certainly have had many weaknesses in the past which I am trying to correct. Currently I think procrastination is one, but, I disguise it by calling it "Staying the course."
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Re: What is your greatest weakness as an investor?

Post by sscritic » Sat Nov 24, 2012 12:00 am

livesoft wrote:I am extremely overconfident. There. I wrote it.
I was going to say the same thing, but I don't consider knowing what you are doing a weakness. Is it possible I make mistakes? Sure, but I don't care.

I don't think I have ever asked someone what I should invest in in the last 35 years. I was sold some junk years ago, but I am none the worse for wear. Making mistakes is how you learn.

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Re: What is your greatest weakness as an investor?

Post by ofcmetz » Sat Nov 24, 2012 12:52 am

It's that I save to much money. It's that I save to little money. Smoothing consumption is probably one of my many weak points.

I'm very confident in asset allocation and staying the course. I truly do believe that others can spot our weaknesses better than we can ourselves. That's why laying it all out on the investor help section of this board from time to time can be very helpful
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Re: What is your greatest weakness as an investor?

Post by obgyn65 » Sat Nov 24, 2012 1:22 am

I am far too conservative (0% in equities).
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Re: What is your greatest weakness as an investor?

Post by grap0013 » Sat Nov 24, 2012 7:34 am

livesoft wrote:I am extremely overconfident. There. I wrote it.
Without a doubt, me too.
There are no guarantees, only probabilities.

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Re: What is your greatest weakness as an investor?

Post by grap0013 » Sat Nov 24, 2012 7:36 am

sscritic wrote: I don't think I have ever asked someone what I should invest in in the last 35 years. I was sold some junk years ago, but I am none the worse for wear. Making mistakes is how you learn.
I'd rather have somebody else make those mistakes and I'll just take notes. :)
There are no guarantees, only probabilities.

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Re: What is your greatest weakness as an investor?

Post by The Wizard » Sat Nov 24, 2012 7:42 am

Interesting question.
I think I did OK in my early years, tax sheltering 15% of salary and mostly spending the rest.
In my more recent, bogleheadish years, I've increased my savings rate significantly.
But now, at age 62-3/4, I'm nervous about quitting employment after 41 years. I can run the numbers and they seem OK, but this is uncharted territory (for me),
For sure, another 20-30% in my investment accounts will make things rosier.
And my 9-year old truck has been giving me increasing grief lately, so I should buy a new F-150 for $30K or so, and work another year to pay for that, right?
So my weakness is: dealing with the transition from Accumulation to Decumulation...
Last edited by The Wizard on Sat Nov 24, 2012 8:18 am, edited 1 time in total.
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Re: What is your greatest weakness as an investor?

Post by leo383 » Sat Nov 24, 2012 8:04 am

I deep down still think I can time the markets. Not on a day to day basis, but on a long term one.

I know that deep down I should be around 60/40 in our portfolio, but we currently are 80/20 and I just can't bring myself to buy into what I think is an overpriced bond market. I guess I'm waiting for the big bond correction to go 60/40,

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Re: What is your greatest weakness as an investor?

Post by cheese_breath » Sat Nov 24, 2012 8:31 am

Keeping my emotions in check and sticking to my AA when something is booming and I'm not in it. A good example is tech stocks in the late 1990s. Prices were soaring, and everyone was saying it would be even better after the Y2K conversions were done and companies began working on all their backlogged projects. I was very, very tempted to jump in, but fortunately reason prevailed over emotions and I didn't.
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Re: What is your greatest weakness as an investor?

Post by VictoriaF » Sat Nov 24, 2012 11:31 am

The Wizard wrote:Interesting question.
I think I did OK in my early years, tax sheltering 15% of salary and mostly spending the rest.
In my more recent, bogleheadish years, I've increased my savings rate significantly.
But now, at age 62-3/4, I'm nervous about quitting employment after 41 years. I can run the numbers and they seem OK, but this is uncharted territory (for me),
For sure, another 20-30% in my investment accounts will make things rosier.
And my 9-year old truck has been giving me increasing grief lately, so I should buy a new F-150 for $30K or so, and work another year to pay for that, right?
So my weakness is: dealing with the transition from Accumulation to Decumulation...
I have to make a similar choice, and I am similarly nervous. What works for me is going away for several weeks and getting the taste of an unencumbered life.

As for my greatest weakness as an investor, it is not related to liquid markets but to real markets. I am terrified of owning my home, and I have come up with a slew of reasons why renting is superior. A common assumption is that those who can buy, and those who can't rent. In my case, I can buy, but I can also use some of my wealth to afford renting.

Victoria
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Re: What is your greatest weakness as an investor?

Post by Sbashore » Sat Nov 24, 2012 11:52 am

My greatest weakness was probably being overly aggressive (100% equities) when the dot com crash came along when I was 5 years away from retirement. I did stick it out and survived, pretty much intact though. Learned a lot about myself and my risk tolerance. Presently, in retirement, I struggle with taking distributions. According to my plan I'm way more conservative in my spending than I need to be. Guess it could be worse. :happy
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Re: What is your greatest weakness as an investor?

Post by Random Walker » Sat Nov 24, 2012 11:54 am

Victoria,
I agree completely with your rent versus buy thoughts. There are many additional costs to buying that the renter doesn't have to deal with. I like the idea of putting money into equities long. They are diversified, provide some dividend and grow. A house is a depreciating asset. The land generally appreciates, but the house depreciates. That's something for an owner to worry about (and pay for), not a renter.
If a person has a mortgage, then their house is a leveraged investment which may or may not turn out well. Historically, it probably does turn out well. I'm always amazed at how few people with mortgages don't view the interest component of their monthly payment as just rent.
The assumption is that renters can't afford to buy. Buts it's pretty nice to live around fellow renters who have no idea how far you are living beneath your means :wink: . Housing is such a personal choice. For me, minimizing interest payments allows me to happily eat out much more often.

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Re: What is your greatest weakness as an investor?

Post by VictoriaF » Sat Nov 24, 2012 12:01 pm

Random Walker wrote:Buts it's pretty nice to live around fellow renters who have no idea how far you are living beneath your means :wink: .
Dave,

This is my case, too :wink: .
Random Walker wrote:For me, minimizing interest payments allows me to happily eat out much more often.
And I channel excess money into travel, which also includes some nice meals. I will probably die with less money and more fun than if I owned, and that qualifies as my "greatest weakness as an investor."

Victoria
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Re: What is your greatest weakness as an investor?

Post by midareff » Sat Nov 24, 2012 12:04 pm

Chasing winners and "aggressive" stuff before learning how useless that is.

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Re: What is your greatest weakness as an investor?

Post by sscritic » Sat Nov 24, 2012 12:13 pm

midareff wrote:Chasing winners and "aggressive" stuff before learning how useless that is.
I notice a lot of people answering what was, not what is (you are not alone).

So are you currently without any weaknesses?

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Re: What is your greatest weakness as an investor?

Post by Grt2bOutdoors » Sat Nov 24, 2012 12:22 pm

1) Second guessing myself - while still young, I paid too much attention to the "noise" and not to my inner self. Had I just ignored the noise (in the form of talking heads, friends, relatives) I'd surely have had better sleep and quite possibly more money in my account instead of a greedy brokers and the folks I bought my current home from. :oops:

I now ignore the "noise" and march to the beat of my IPS. :D I could care less if ABC stock went up or down 3 points today based on some market guru's "buy,hold or sell" call, I only want to know if my allocation is severely out of whack and needs to be rebalanced. Some people don't like nominal bonds - like EE's :wink: , that's fine, but if my IPS calls for it - then I'm buying or selling it.

As for SSCritic - up above is a "was" and "still is" - yes, I ignore the noise, but it's still a battle - sometimes you want to give in and the key is not to let your defenses down.
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Re: What is your greatest weakness as an investor?

Post by Random Walker » Sat Nov 24, 2012 12:25 pm

Victoria,
Ever read The Millionaire Next Door? I found it a life changing book. Where I live in Las Vegas all the houses look the same and they all have the same cars in front. Although the lifestyles look the same, the balance sheets behind those lifestyles are hugely different. One house can be paid off with 2 paid off used cars in the front and the neighbor can be mortgaged up to his ears with 2 leased cars in the driveway. Didn't know who was who until the housing bubble burst and one day a neighbor (or 2 or 3) was suddenly gone. In Millionaire Next Door they say the Texans refer to those people as "big hat, no cattle"

Dave

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Re: What is your greatest weakness as an investor?

Post by VictoriaF » Sat Nov 24, 2012 12:26 pm

sscritic wrote:I notice a lot of people answering what was, not what is (you are not alone).

So are you currently without any weaknesses?
Past weaknesses are "known unknowns." Current weaknesses are "unknown unknowns." "Unknowns"--because an investor's performance is prospectively probabilistic.

Victoria
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Re: What is your greatest weakness as an investor?

Post by af895 » Sat Nov 24, 2012 5:06 pm

My weakness: dining out.

I could cut more from my discretionary spending and save more of my money. Doing that would have more effect on my long term investment outcomes than tinkering with an already clean and efficient (albeit modest) portfolio.
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Re: What is your greatest weakness as an investor?

Post by midareff » Sat Nov 24, 2012 5:11 pm

sscritic wrote:
midareff wrote:Chasing winners and "aggressive" stuff before learning how useless that is.
I notice a lot of people answering what was, not what is (you are not alone).

So are you currently without any weaknesses?
Interesting question. Since the experts; Jack, Swedroe, Ferri, Bernstein, etc., do not agree on a perfect portfolio with no weaknesses it would seem the answer to your question, at least in my eyes would be no weaknesses. Others may have a question about REITs, SV, SI, etc., S&D, bond allocations and so forth. One can always "pick" something to call a weakness. Ouitside of rebalancing I see no changes for the next 5 1/2 years until RMD hits.

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Re: What is your greatest weakness as an investor?

Post by papito23 » Sat Nov 24, 2012 11:05 pm

Tinkering. Tinkering.

And Tinkering. This forum can help... or hurt. If in doubt, listen to Taylor Larimore!
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Re: What is your greatest weakness as an investor?

Post by The Wizard » Sun Nov 25, 2012 5:11 am

VictoriaF wrote:
sscritic wrote:I notice a lot of people answering what was, not what is (you are not alone).

So are you currently without any weaknesses?
Past weaknesses are "known unknowns." Current weaknesses are "unknown unknowns." "Unknowns"--because an investor's performance is prospectively probabilistic.

Victoria
I don't think performance of one's investments has much to do with strength or weakness as an investor.
2012 looks to be an UP year so far, so we're all doing OK right now.
To determine your hidden weaknesses, you may indeed have to look back to the last few stock market declines to see what you did.
This is because when the next decline happens, this hidden weakness (if it exists) will pounce out and bite you...
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Re: What is your greatest weakness as an investor?

Post by VictoriaF » Sun Nov 25, 2012 8:28 am

The Wizard wrote:
VictoriaF wrote:
sscritic wrote:I notice a lot of people answering what was, not what is (you are not alone).

So are you currently without any weaknesses?
Past weaknesses are "known unknowns." Current weaknesses are "unknown unknowns." "Unknowns"--because an investor's performance is prospectively probabilistic.

Victoria
I don't think performance of one's investments has much to do with strength or weakness as an investor.
2012 looks to be an UP year so far, so we're all doing OK right now.
To determine your hidden weaknesses, you may indeed have to look back to the last few stock market declines to see what you did.
This is because when the next decline happens, this hidden weakness (if it exists) will pounce out and bite you...
The performance of the investments is unrelated to the strengths and weaknesses of an investor. However, the investor's self-assessment of her strengths and weaknesses as an investor involves some probabilistic analysis.

For example, in March 2009, I did not sell any of my stock holdings. At that point in time, I did not know what would happen to the markets going forward. The market performance between March 2009 and Nov 2012 was an "unknown" (noun) qualified as "unknown" (adjective) -- where unknown-noun represented the risk I was taking and unknown-adjective represented my prospective ignorance of the outcome -- thus, an unknown unknown.

Today, on 25 Nov 2012, I know how the stock market has performed between March 2009 and Nov 2012, and my not selling in March 2009 has become a known unknown. It remains an unknown (noun), because I still don't know (and will never know) how much risk was there for my stock holdings in March 2009.

Thus, when I conduct my self-assessment as an investor with respect to my past options and choices, I deal with known unknowns, where the risk of the past options is an unknown but my choices and their outcomes are now known. When I assess myself as an investor with respect to my current options and choices I am making today, I deal with unknown unknowns.

Victoria
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Re: What is your greatest weakness as an investor?

Post by bertilak » Sun Nov 25, 2012 1:41 pm

papito23 wrote:Tinkering. Tinkering.
hazlitt777 wrote:Perhaps boredom is my greatest weakness. This generates the need to find something interesting and new, leading to the temptation to "do something" ...
Me too, and I plan on doing something about that! :happy

Actually, I already have done something: I made things even more boring. 90% of my IRA is now in Wellington and 10% in REITs. I did this because I realized my carefully constructed, six-fund portfolio was much too complicated for any of my heirs/beneficiaries to deal with. My instructions to heirs is to not muck with it. Zero maintenance is required except for two things:
  1. Up-coming RMDs. May need to reinvest in taxable account, also using Wellington. See our tax guy for how much and then a Vanguard advisor to implement.
  2. Need for cash flow (if the above is not enough). See a Vanguard advisor to take dividends as cash instead of reinvesting.
So, even with this simplification there will be more than enough to deal with. Worrying about fund selection and rebalancing in addition would be too much. (Someday I may go a step further and eliminate the REITs.)

I also have a trust account for my mother. I am waiting for cap gains to go long term (December 17th) and will convert that all to Wellesely. (The cap gains are all offset by cap losses from earlier tinkering, but I have more long-term losses accumulated.)
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Re: What is your greatest weakness as an investor?

Post by 6miths » Sun Nov 25, 2012 3:52 pm

My biggest weakness is not getting cash working. I have focused on asset allocation and been an indexer from the beginning but have a tendency to let cash pile up on the sidelines before putting it to work. This effectively makes my portfolio more conservative at most times than I planned.
'It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so!' Mark Twain

Mr Grumpy
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Re: What is your greatest weakness as an investor?

Post by Mr Grumpy » Sun Nov 25, 2012 4:19 pm

My weakness as an investor is probably the same as my weakness as a person - don't know if it's my "greatest" though - have to talk to the wife about that. Once I've thought about something (financial investing, politics, theology, etc) I tend to get dug in. I wouldn't say I have a closed mind, but the tendency is definitely there.
The real harm that does is shut off free-flowing ideas and good conversation. I'm a confirmed index guy so conversations with active fund believers tend to be quick and I've got to take some blame for that. I also usually ask, in passing, what their AA is and I'm always met with a blank stare - I've learned that doesn't help either.

Fallible
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Re: What is your greatest weakness as an investor?

Post by Fallible » Sun Nov 25, 2012 7:46 pm

pkcrafter wrote:I don't strive for maximum returns. Even worse, I don't care what the other guy is getting -sigh- :(

Paul
This sounds familiar, though I never thought about it before. I probably could be doing better but not that much better, and I'm only vaguely interested in what others are getting. But are these weaknesses? Or maybe only minor ones (I hope...)?
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Fallible
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Re: What is your greatest weakness as an investor?

Post by Fallible » Sun Nov 25, 2012 8:15 pm

VictoriaF wrote:
The Wizard wrote:...
So my weakness is: dealing with the transition from Accumulation to Decumulation...
I have to make a similar choice, and I am similarly nervous. What works for me is going away for several weeks and getting the taste of an unencumbered life.

Victoria
You may need more than several weeks for a true taste test. Can you take a sabbatical of, say, a year? That worked for me as I decided whether to leave a longtime career. (Um, I won't mention the career as the profession is known for its lack of imagination... :wink: )
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paper200
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Re: What is your greatest weakness as an investor?

Post by paper200 » Sun Nov 25, 2012 9:35 pm

Cash - fear of holding it and fear of losing it. It had been a long 6-8 years! Presently Stock to (Bond/Cash) ratio 35:65. 10-15 years for voluntary retirement.
Having freedom, food and roof is being 90% lucky in life and so is index investing. So, don't let the remaining 10% bother you.

jginseattle
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Re: What is your greatest weakness as an investor?

Post by jginseattle » Sun Nov 25, 2012 11:29 pm

I seem to be somewhat susceptible to recency bias. I have to work at not letting it affect my plan.

ThatGuy
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Re: What is your greatest weakness as an investor?

Post by ThatGuy » Mon Nov 26, 2012 5:32 am

Wine, women, and song. Particularly the women part.
Work is the curse of the drinking class - Oscar Wilde

FillorKill
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Re: What is your greatest weakness as an investor?

Post by FillorKill » Mon Nov 26, 2012 8:17 am

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Last edited by FillorKill on Wed Jan 01, 2014 8:51 am, edited 1 time in total.

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