JoMoney wrote: ↑Sat Oct 06, 2018 8:33 am
I think I could argue just about all of those non-truths aren't falsehoods either.
... I mean, a trend following strategy that's buying stocks on the way up and trys to sell when it reverses has had periods of success... I would have a difficult time explaining duration or convexity of a bond fund to an 8 year old, but there's plenty of "story stocks" and mutual fund narratives that would be quite compelling ... no stocks are 'safe', but a portfolio of large blue chip dividend payers would be considered less risky on just about every measure ...
What I would say is that there are nuances to investing. Not everything can be reduced to soundbites. Investing can be relatively simple but I would say in comparison to what? It is both easier and more difficult than it appears. Perhaps I will expand on that later. For now, I will say that emotional control is one aspect of investing that people don't think about enough.
For example, on Roth's point number 3, I would say buy good companies but don't overpay for them. If expectations are too high, even a good company can be a poor investment. Hence my multiple posts about my "Four Horsemen of Underperformance." I bought four great companies from the 1990's at "bargain" prices in the early 2000's but in retrospect still paid too much for them. They were AIG, GE, Microsoft, and Pfizer. Microsoft has turned around and I have replaced it with Ford in my "anti-index". Ford was extremely cheap but I fear it might just be a value trap. Roth makes a good point about Value but even experts can't always tell the difference between a good company with temporary problems and a Value trap. Even Warren Buffett has his clunkers.
On item number 4, Blue Chip dividend paying stocks are relatively safe, that is if you don't overpay for them. I would also say that even a portfolio of Blue Chip Stocks needs a bit of maintenance. Bad things can happen to good companies. You need to check to see that future prospects continue to be bright. Eastman Kodak is a good example, once photography went to digital, Eastman Kodak no longer had a competitive advantage, all kinds of companies were making good digital cameras. As Morningstar would say, look for companies that have a moat.
On point number 7, I agree that we cannot assume that the future will be like the past. But on the other hand, while history doesn't repeat itself exactly, it does tend to rhyme. The past is all we have when looking for financial data. Back testing is not useless but we have to realize its limitations. The past can give us a fairly good idea of what might happen in the future but the crystal ball is cloudy.
A fool and his money are good for business.