I confess; I am not a very good investor. Or at least not with stocks and bonds. I generally have no special knowledge. (Other than a clear understanding that paper money always goes down, never to return, in any period longer than a year or two.
I prefer to invest in tangible things, which I control, and I can affect.
But the lessons below can still be useful!
http://realinvestmentadvice.com/resources/blog/the-awards-you-never-get-when-investing/
The article is good fun, so please use the link!
Conclusion: Building a Smarter Path to Investing Success
To avoid the costly mistakes outlined above, investors must adopt a disciplined, process-driven approach to managing their portfolios. Sustainable investment success comes from understanding, not reacting to, market behavior. Here are the critical steps you should take:
First, embrace losses as part of the investment journey. Prune weak investments when they no longer fit your strategy, reallocating capital to stronger opportunities rather than waiting for recoveries that may never come.
Second, respect risk. Avoid equating bravery with excessive risk-taking. Build portfolios aligned with your personal financial goals and loss tolerance, focusing on diversification and asset valuation rather than speculative bets.
Third, redefine long-term investing. Remaining loyal to a poor investment out of hope wastes time and wealth. Maintain objectivity by reassessing whether each holding still meets your original investment thesis.
Fourth, implement active risk management. Use stop-loss strategies, periodic rebalancing, and technical indicators like the 40-week moving average to protect against significant drawdowns. Managing risk is about ensuring survival, not limiting success.
Finally, stop chasing the S&P 500. Focus instead on achieving your financial objectives with consistent, risk-adjusted returns. Outperformance is meaningless if you fail to meet real-world needs, like securing retirement income or building generational wealth.
Successful investing is not about winning arbitrary “awards.” It is about managing risk, preserving capital, and steadily compounding returns toward your goals. Ignore the noise, stay disciplined, and remember: no one hands out awards for reckless investing—only consequences.
Sources
Barberis, N., & Thaler, R. (2003). A survey of behavioral finance.
Shefrin, H., & Statman, M. (1985). The disposition to sell winners too early and ride losers too long.
Fama, E. F., & French, K. R. (2004). The Capital Asset Pricing Model: Theory and Evidence.
Markowitz, H. (1952). Portfolio Selection.
Ang, A. (2014). Asset Management: A Systematic Approach to Factor Investing.
Brinson, G. P., Hood, L. R., & Beebower, G. L. (1986). Determinants of Portfolio Performance.
Elton, E. J., & Gruber, M. J. (1997). Modern Portfolio Theory, 1950 to date.
Jones, C. M., Wermers, R., & Zi, J. (2020). Mutual fund performance in changing times.
Brunnermeier, M. K. (2009). Deciphering the Liquidity and Credit Crunch 2007–2008.
S&P Dow Jones Indices. (2023). SPIVA U.S. Scorecard.
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