Evening Must-Read: Noah Smith: Ten Investing Facts of Life

…Almost all… are good advice…. There was really only one I didn’t like: ’67. Finance would be better if it was taught by the psychology and history departments…’. As someone who teaches finance, I might sound a little self-serving for saying that academic finance has valuable things…. But… [many of] Housel’s… aphorisms… come from… finance professors!… 10 of my favorites….

(6)… Erik Falkenstein says: ‘In expert tennis, 80% of the points are won, while in amateur tennis, 80% are lost. The same is true for… investing’…. (14)… Nick Murray…. ‘Timing the market is a fool’s game, whereas time in the market is your greatest natural advantage.’… (24)… 40% of stocks have suffered ‘catastrophic losses’ since 1980…. If you understand the math of the random walk… this won’t be very surprising! (28.)… 72% of mutual funds benchmarked to the S&P 500 underperformed…. Finance profs have been yelling about this for decades…. (44). Our memories… extend… a decade back…. [Time] erases many important lessons…. (46)… The most boring companies… can make some of the best long-term investments…. Finance researchers have noticed the outperformance of value stocks over glamor stocks for decades! (50)… U.S. stocks increased 2,000-fold between 1928 and 2013, but lost at least 20% of its value 20 times…. (68)… Tim Duy, ‘As long as people have babies, capital depreciates, technology evolves, and tastes and preferences change, there is a powerful underlying impetus for growth that is almost certain to reveal itself in any reasonably well-managed economy.’ This is great advice. But it’s also a reason not to invest in stocks in Japan…. (90)… Those who trade the most earn the lowest returns…. (97)… The single best three-year period to own stocks was during the Great Depression. Not far behind was the three-year period starting in 2009…. Long-run predictability is one of the most interesting facts discovered by finance researchers… what earned Yale economist Bob Shiller his 2013 Nobel…. Housel’s compilation of aphorisms is a good list. Check it out. And remember, finance academics are hard at work discovering interesting and useful facts about investing, trading and asset markets.”