2014 Market Strategy

Well, everyone else is trotting out their “best ideas for 2014” lists, so here we go.

1) Admit how little you really know.  You don’t know what US stocks will do.  You don’t know what international stocks will do.  You don’t know what interest rates will do.  You don’t know what the economy will do.  You don’t know how investors will behave.  You don’t know what Congress will do.  You don’t know what corporate profits will do. You don’t know what the next hot IPO will do. You don’t know what the US Dollar will do. You plainly cannot know if large cap/small cap/international/real estate/energy/high yield/commodities/Treasuries/currencies/growth/value will lead the charge in 2014. Getting the picture?  The world is a vastly more complicated place than any prediction will assume.

2) Eliminate as many possible sources of market noise as possible.  Got a great tip from CNBC last year?  Turn it off.  Your newsletter subscription says hyper-inflation is just around the corner? Cancel it.  Your golf buddy is telling you about the great hedge fund he got in on? Change the subject. Political pundit says we’re going to hell in a handbasket?  Go outside. Broker at a dinner seminar has a silver bullet? Finish your wine and get home. Not a single one of these people is providing you with valuable, actionable information.  They know just as little  as you do (and probably less). Their job is to be noisy or worse, sell you something.  Neither depends on being right on a regular basis.

3) Learn something new about the world.  Read a new book.  Have an intelligent conversation with someone who disagrees with you. Have several. Talk, don’t argue. Travel. Find a new podcast and listen regularly. It is becoming increasingly easy to live in a small homogeneous world and only listen to that which you agree with.  Don’t do that.

4) Learn something new about yourself.  Behavioral bias is dangerous stuff.  Where are your blind spots? Go read Thinking, Fast & Slow or The Science of Fear or Predictably Irrational or Nudge: Improving Decisions about Health, Wealth, and Happiness or Psychology of Investing or Irrational ExurberanceSuccessful investing is primarily about making fewer mistakes.  This is why Charlie Ellis calls it “Winning the Loser’s Game.”

5) Learn something about great long-term investors.  Read a classic investing book like The Intelligent Investor or A Random Walk Down Wall Street or Buffet’s Collected Shareholder Letters or The Little Book of Common Sense Investing or Against The Gods.

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