"Heads I Win, Tails I Win -- A Gem

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Taylor Larimore
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"Heads I Win, Tails I Win -- A Gem

Post by Taylor Larimore »

Bogleheads:

I recently had the opportunity to read an excellent book by Spencer Jakab, now Deputy Editor of Heard on the Street at The Wall Street Journal. Mr. Jakab's former experience and insight as a top-rated stock analyst with Credit Suisse offer investors a rare and interesting look inside Wall Street and the lessons he's willing to share with investors. These are excerpts:
We're handicapped by an industry with multimillion-dollar marketing budgets and an eye on its own bottom line, not yours.

Unless you are very handy, you probably don't know how to fix your own car or refrigerator--but most Americans are expected to be part-time fund managers.

Fear, greed, naivete, bad advice and even the cost of sound advice combine to whittle away the pot of money we should earn after a lifetime of saving relative to what we could have amassed.

Most people think they can (beat the market), but few can.

The more passive your approach to investing, the greater the likelihood your results will match the market return.

John Bogle, the father of index funds, says, "Don't just do something , stand there." It can't be repeated enough and is the first, easiest, and most productive step out of Lake Moneybegone.

Markets are a little like a rubber band -- the more stretched they get, the likelier they are to snap back in the other direction.

I would say that there's only a fine line between market timing and astrology.

As for the majority of downturns, the time to sell is never.

The most interesting and hopeful statistic about downturns, particularly sharp ones, is how strong the rebound can be.

The simplest remedy for sleeping well at night, and a prudent step on its own, is to have a mix of lower-risk assets like bonds alongside stocks.

The typical lottery winner blows through his or her winnings within seven years.

For most people reading this, a low-cost target date fund may be the best bet.

Stocks are the only market where people run away when there's a sale and line up at the door when prices have just doubled or tripled.

The amount of money Americans spend on forecasting has been estimated to be as high as $300 billion annually, much of it for choosing investments.

I used to be in the fortune-telling business myself and made a nice living out of it.

Zacks Investment Research looked at recommendations for stocks in the S&P 500 in late 2000, and found that of eight thousand recommendations, only twenty-nine were sells (Vanguard 500 Index Fund plunged -51% in the 2008-2009 bear market).

Performance data take only the average of surviving funds. While it isn't a conspiracy, studies have shown that published industry returns would be over a percentage point lower if vanished funds were included.

Numerous studies have come to the same conclusion: You get what you don't pay for. Costs are an almost perfect predictor of performance.

It's nearly impossible to pick consistently superior managers.

Most investors, probably including you, should be tickled pink to earn an average return.

Seven habits of ineffective investors:
1. Get in on that hot new deal
2. Combine your morals and your money
3. Buy what's fashionable
4. Reach for yield
5. Use exotic product to enhance your returns
6. Trade frequently
7. Use a "system"

The obvious reason for avoiding the temptation to peek is that you're likely to do more than just look, and activity is costly.

Pay as little as possible and do as little as possible to make sure your nest egg grows. My recommended vehicle for doing that has been low-cost index funds -- the cheaper the better.

There have been periods exceeding ten years when, even with dividends, U.S. stocks showed paper losses.

Fear and greed trump theory and logic.

Someone who tries to sell you a complicated annuity, non-term life insurance policy, or unsuitable investments such as an unlisted real estate investment trust or pooled commodity account should throw up red flags.
Thank you, Mr. Jakab!

More Investment Gems

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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dwickenh
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Re: "Heads I Win, Tails I Win -- A Gem

Post by dwickenh »

Taylor,

Thanks for another great list, I never tire of good reading and logical thinking.

Best to you,

Dan
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett
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Re: "Heads I Win, Tails I Win -- A Gem

Post by Wricha »

Thank you once again Mr Larimore.
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Re: "Heads I Win, Tails I Win -- A Gem

Post by Fallible »

Couldn't agree more, Taylor, and I'm glad to see your "Gems." I read the book recently and it is basically Boglehead all the way.

I'd like to suggest adding to the "gems" what he refers to as the "key takeaways" from his book, beginning on page 255 (and following a great quote from Jason Zweig). I've just included the opening topics of each of the seven takeaways.
"Here are the key takeaways from this book that you should feel free to fold up and put in your wallet or recite to friends, neighbors, and airplane seatmates until their eyes glaze over:

"Know yourself: ...
Stop zigging when you should zag: ...
Learn to be cheap and lazy: ...
Don't confuse luck and skill: ...
Turn lemons into lemonade: ...
History doesn't repeat, but it does rhyme: ...
Don't be afraid to ask for help, but only as much as you need: ..."
"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
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Taylor Larimore
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Re: "Heads I Win, Tails I Win -- A Gem

Post by Taylor Larimore »

Fallible wrote:Couldn't agree more, Taylor, and I'm glad to see your "Gems." I read the book recently and it is basically Boglehead all the way.

I'd like to suggest adding to the "gems" what he refers to as the "key takeaways" from his book, beginning on page 255 (and following a great quote from Jason Zweig). I've just included the opening topics of each of the seven takeaways.
"Here are the key takeaways from this book that you should feel free to fold up and put in your wallet or recite to friends, neighbors, and airplane seatmates until their eyes glaze over:

"Know yourself: ...
Stop zigging when you should zag: ...
Learn to be cheap and lazy: ...
Don't confuse luck and skill: ...
Turn lemons into lemonade: ...
History doesn't repeat, but it does rhyme: ...
Don't be afraid to ask for help, but only as much as you need: ..."
Fallible:

Thank you for adding the "key takeaways."

This is the "Great quote from Jason Zweig":
My job is to write the exact same thing between fifty and a hundred times a year in such a way that neither my editors nor my readers will ever think I am repeating myself. That's because good advice rarely changes, while markets change constantly. The temptation to pander is almost irresistible. And while people need good advice, what they want is advice that sounds good. The advice that sounds the best in the short run is always the most dangerous in the long run. Everyone wants the secret, the key, the road map to the primrose path that leads to El Dorado: the magical low-risk, high-return investment that can double your money in no time.
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: "Heads I Win, Tails I Win -- A Gem

Post by LadyGeek »

The book is now in the wiki: Taylor Larimore's Investment Gems
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
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Taylor Larimore
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Re: "Heads I Win, Tails I Win -- A Gem

Post by Taylor Larimore »

LadyGeek wrote:The book is now in the wiki: Taylor Larimore's Investment Gems
LadyGeek:

Thank you for this -- and all the other work behind the scene that you do!!

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: "Heads I Win, Tails I Win -- A Gem

Post by oldzey »

Thank you, Taylor and LadyGeek!
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman
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Re: "Heads I Win, Tails I Win -- A Gem

Post by Fallible »

Taylor Larimore wrote:...
Fallible:

Thank you for adding the "key takeaways."

This is the "Great quote from Jason Zweig":
My job is to write the exact same thing between fifty and a hundred times a year in such a way that neither my editors nor my readers will ever think I am repeating myself. That's because good advice rarely changes, while markets change constantly. The temptation to pander is almost irresistible. And while people need good advice, what they want is advice that sounds good. The advice that sounds the best in the short run is always the most dangerous in the long run. Everyone wants the secret, the key, the road map to the primrose path that leads to El Dorado: the magical low-risk, high-return investment that can double your money in no time.
Best wishes.
Taylor
Thanks for adding that "great" quote, Taylor. And my thanks also to LadyGeek for outstanding work.
"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
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Re: "Heads I Win, Tails I Win -- A Gem

Post by nedsaid »

Taylor, I have very much enjoyed your gems. You have a talent for boiling down an entire book to your gems. Pretty much, I can save money buying books by reading your gems. Are you sure that you never worked for Readers' Digest? The gems are the equivalent of Campbell's soup, condensed.
A fool and his money are good for business.
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Re: "Heads I Win, Tails I Win -- A Gem

Post by monkey_business »

nedsaid wrote:The gems are the equivalent of Campbell's soup, condensed.
What?! Taylor's gems are the equivalent of condensed cheap canned soup?

More like grandma's soup. It's hearty, delicious, and puts a smile on your face. :D
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Taylor Larimore
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"Investment Gems"

Post by Taylor Larimore »

monkey_business, nedsaid and others:

Thank you for recognizing the value of the "Investment Gems."

I am unaware of any other source that can give us the best ideas, from the best financial writers, in the shortest amount of time.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: "Heads I Win, Tails I Win -- A Gem

Post by htdrag11 »

"Most investors, probably including you, should be tickled pink to earn an average return."

Leaving my ego at the door was a major step toward achieving average.

Thank you Taylor. :happy
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