Thoughts on Investing

 More Thoughts on Investing from David E Hultstrom

• Taxes and inflation matter a great deal but because they aren’t reflected in performance reports they are inappropriately ignored.
• Taxes should not drive investment decisions though they may influence them at the margin.
• Make sure you are getting experience for the time you are putting in.  Few people have 20 years of experience.  Many people have the same year of experience 20 times.
• Most mistakes are attributable to ignorance, myopia, and hubris.  Principally hubris.
• Wanting or needing x% return doesn’t cause it to be available in the market.
• Returns are random and randomness is more random than you think.  Control risk and accept the returns that show up when they show up.
• The difference between wise and foolish investors is that the first focuses on risk while the second focuses on return.
• No one has any idea what the market is going to do in the short run and only a vague idea in the long run.  When J.P. Morgan was asked what the market was going to do that day, he replied, “It will fluctuate.” If your business model depends on your ability to forecast, you are doomed.
• Risk doesn’t equal return.  You can’t earn excess returns without taking risk, but it is possible to take risks that have no reasonable expectation of excess return

 Leverage works in both directions.