Cash positions within the investment portfolio should be minimized and most likely be kept at zero. Membership in the active management cohort requires full-time dedication to understanding and exploiting market opportunities. Second, most investors who change funds pay much larger, but hidden, costs because they sell after the worst part of the losses and buy after the best part of the gains. Investors who wisely ignore the deceptive tricks of Mr. The distinguished military historian Admiral Samuel Eliot Morison makes a similar central point in his thoughtful treatise Strategy and Compromise: More important, the chances of your identifying one of the great winners before the record has been established is very low. You may use the work for your own noncommercial and personal use; any other use of the work is strictly prohibited. 
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McGraw-Hill has no responsibility for the content of any information accessed through the work. Their professionals meet with corporate management frequently. This updated investment classic belongs on every investor's bookshelf. Anyone who has observed gifted investors at work will ldf the art—subtle, intuitive, complex, and usually inexplicable— in selecting individual stocks or groups of stocks.
Charles Ellis - Winning the Losers ( Pages )
Note that the taxes assumed are minimal: An even losegs reason for individuals to index is that you are then free to devote your time and energy to the one role where you have a decisive advantage: Anyone who feels offended by them is just being too sensitive.
In all its forms this practice is nonsense.
As a result, no single group of investors is likely to gain and sustain a repetitive useful advantage over all other investors on stock selection. Candidly, when individuals act because of reasons they think are inside the market, they are usually making a mistake; they are either optimistic and late because the market has been rising or pessimistic and winnng during a falling wlnning.
The irony is that for most investors, professional or individual, most of this activity winninng does not matter— not because the investment professionals are not highly talented, but because so many competitors are equally highly talented. The answer is daunting. One reason is particularly striking.
Technology has transformed investing just as GPS global position system technology has transformed navigation. And for active individual investors, the record is even worse.
It was all hearts! The average return realized by mutual fund investors is sharply lower than the returns of the very funds they invest in because investors sell funds with recent disappointing performance and buy funds with recent superior performance. By managing market risk, we are doing two things at the same time: So even if losets are—before costs of operation—slightly ahead of the market, thanks to all their hard work, most fund managers can be expected to lag behind the market after fees and expenses as is explained in Chapter 1 and illustrated in Figure Not only are these responsibilities taken personally, but for some needs— particularly health care late in life—the amount of money that will be required is unknown and may become almost unlimited.
The more you know about yourself as an investor and the more you understand the securities markets, the more you will know what long-term asset mix is really right for you and the more likely it is that you will be able to ignore Mr. Here are a few simple tests of investment policy: Ininvestors were remarkably but almost predictably highly optimistic, anticipating more of the same compounding—particularly investors who were enamored of Internet stocks and were chanting the mantra of all stock market bubbles: Holding to that chosen level of market risk through good and bad markets.
Regression to the mean was sure to come again. Market goes into his gyrations? T h e Pa r a d o x Second, what are your probable emotional reactions to an adverse experience? For him, the more activity, the better. These persistent costs mount up unrelentingly and do as much harm to investment portfolios as termites do to homes.
The normal difference in yield and therefore price between corporate and government bonds changes, causing larger or smaller spreads between corporates as a group and governments as a group. The best shields against Mr.
History can tell us a lot. And our feelings get stronger and stronger the more—and the faster—the prices of our stocks rise or fall.
Despite the constancy of the average expected rate of return— no matter what the time period—the profound impact of time on the actual realized rate of return is clearly demonstrated in the chart in Figure 8.
Winning the Loser's Game, Fifth Edition: Timeless Strategies for Successful Investing
This helps because working with decades reminds us that sound investing is inherently long term in nature. Although players in both games use the same equipment, dress, rules, and scoring, and both conform to the same etiquette and customs, they play two very different games.
Our internal demons and enemies are pride, fear, greed, exuberance, and anxiety.
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