Author Topic: the MOST IMPORTANT INVESTING RULE!!!  (Read 5009 times)

dividendman

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the MOST IMPORTANT INVESTING RULE!!!
« on: January 30, 2015, 10:55:49 AM »
http://money.cnn.com/2015/01/30/investing/most-important-investing-rule/index.html?iid=HP_LN

Basically it asks three investment managers what their most important rule is.... none of them are very good. So 1) the article doesn't have "the most important rule", 2) Of the three rules it states, they aren't very good advice for the masses

MrFrugalChicago

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Re: the MOST IMPORTANT INVESTING RULE!!!
« Reply #1 on: January 30, 2015, 01:06:10 PM »
Money.cnn.com is a fairly good rep of the "mainstream american financial advice"

By no means is it horrible stuff (like invest all your money in 1 stock!), but it is also not frugal oriented like MMM. It is how to spend as much money as you can while you work, and then retire at 70 and keep spending the same amount.

It seems an overall "valid" choice. Silly to a lot of people here, but it does beat the go broke and never retire mindset of a lot of people...

RangerOne

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Re: the MOST IMPORTANT INVESTING RULE!!!
« Reply #2 on: January 30, 2015, 01:22:19 PM »
These are essentially rules that apply to non-index investing...

Investing in index's eliminates the concerns that these rules seem to be addressing. Basically that article isn't for the average smart investor. Its for people trying to be the next Warren Buffet.

slugline

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Re: the MOST IMPORTANT INVESTING RULE!!!
« Reply #3 on: January 30, 2015, 03:11:48 PM »
I think that can be summarized as (1) have inside information that gives you an advantage over the investing public and (2) diversify.

LalsConstant

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Re: the MOST IMPORTANT INVESTING RULE!!!
« Reply #4 on: February 01, 2015, 07:56:25 AM »
the next Warren Buffet.

And this baffles me why some people consider Buffet an example to follow.  Warren Buffet did something most people can't do:  Buy entire companies, optimize their management/supply chain/structure because you control them now, and increase their profit yield.  He didn't sit there in his robe and wizard hat pouring over abstract financial statement minutiae and through sheer brilliance divine their future performance, thereby determining they were "undervalued".

That's a wholly different scenario from your average retail investor who has no meaningful influence over the operations of any company they invest in.

MgoSam

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Re: the MOST IMPORTANT INVESTING RULE!!!
« Reply #5 on: February 02, 2015, 06:13:04 AM »
the next Warren Buffet.

And this baffles me why some people consider Buffet an example to follow.  Warren Buffet did something most people can't do:  Buy entire companies, optimize their management/supply chain/structure because you control them now, and increase their profit yield.  He didn't sit there in his robe and wizard hat pouring over abstract financial statement minutiae and through sheer brilliance divine their future performance, thereby determining they were "undervalued".


I'm not expert on WB, but isn't that the opposite of what he did? I thought his idea was to pour over F/S to find undervalued companies, or company that were so profitable they could "be run by a ham sandwich." I believe that he always sought companies whose management he liked, and avoided tinkering once he purchased them.

Oh, and to be able to buy companies, you generally need a ton of cash. Guess how got there? By buying stock in companies that he thought were undervalued until he made a fortunate for him and his clients.

LalsConstant

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Re: the MOST IMPORTANT INVESTING RULE!!!
« Reply #6 on: February 02, 2015, 06:38:12 AM »
the next Warren Buffet.

And this baffles me why some people consider Buffet an example to follow.  Warren Buffet did something most people can't do:  Buy entire companies, optimize their management/supply chain/structure becausseee you control them now, and increase their profit yield.  He didn't sit there in his robe and wizard hat pouring over abstract financial statement minutiae and through sheer brilliance divine their future performance, thereby determining they were "undervalued".


I'm not expert on WB, but isn't that the opposite of what he did? I thought his idea was to pour over F/S to find undervalued companies, or company that were so profitable they could "be run by a ham sandwich." I believe that he always sought companies whose management he liked, and avoided tinkering once he purchased them.

Oh, and to be able to buy companies, you generally need a ton of cash. Guess how got there? By buying stock in companies that he thought were undervalued until he made a fortunate for him and his clients.

No expert here either but Buffet has written entire books  on business management.  He is famous for advocating against micromanagement however.

Also Buffet early in his career did finance many of his ventures and made a lucky windfall speculating in silver.

None of this takes away from what he accomplished but people don't seem to realize that he put a lot of elbow grease into things and took risks.

zephyr911

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Re: the MOST IMPORTANT INVESTING RULE!!!
« Reply #7 on: February 02, 2015, 10:22:40 AM »
http://money.cnn.com/2015/01/30/investing/most-important-investing-rule/index.html?iid=HP_LN

Basically it asks three investment managers what their most important rule is.... none of them are very good. So 1) the article doesn't have "the most important rule", 2) Of the three rules it states, they aren't very good advice for the masses
How is "learn, learn, learn... and keep learning" bad advice for the masses? If you put enough effort into learning, you eventually find out some very basic facts that can lead you right into Mustachianism if your values match it. Read about investing long enough, and you'll find these facts:

- It is possible to retire very early, and most people who do it are extremely happy
- Actively managed funds are a waste because expense ratios correlate poorly to higher returns
- Index investing is a reliable way to grow your 'Stash
- Investing early and often puts time on your side through compounding

Learning has never made me want to invest less, or to choose bad investments. It almost always makes me want to spend less and invest more, while thinking more carefully about my investments all the time.

Aushin

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Re: the MOST IMPORTANT INVESTING RULE!!!
« Reply #8 on: February 02, 2015, 01:02:42 PM »
The top answer of this Quora question is long, but it's an excellent explanation of why Warren Buffett has gotten very high returns on his money for so long.  And I doubt it's long enough to deter most people who come to this site.

http://www.quora.com/If-Warren-Buffett-had-to-start-today-could-he-still-reach-his-current-level-of-wealth

Basically he invests quite a lot of other people's money that he owes very small percentages on, sometimes even negative percentages on (if you conceptualize running an insurance company as taking negative-interest loans).  It's pretty fascinating.