My (Not so) Golden Rules About Investing (And Not Investing) Philip Fisher. James Montier. Greenlight Capital. To sort... Sir John Templeton 16 Rules For Investment Success. Want to Avoid Blowing Up Like Paulson? Don’t Forget Buffett’s Two Rules. Is it December 31 yet?
John Paulson must be breathing a small sigh of relief. The recent bounce in the prices of bank stocks and gold has, at least for the time being, stopped the bleeding. The patient, alas, is still in critical condition. It’s been a rough year for the hedge fund legend. According to the Financial Times, Mr. I’ll refrain from kicking Mr. The problem, as Mr. Take a look at Figure 1. Figure 1 But now take a look at the bottom of the chart. The Sage of Omaha This is what prompted Warren Buffett to pen his first two rules of investing: Don’t lose money.Don’t forget the first rule.John Paulson broke Mr. Paulson had roughly 30 percent of his fund in financials, 15 percent in materials, and 9 percent in oil and gas. Paulson also happens to be the largest shareholder in the SPDR Gold Trust (GLD) and is so enamored with the yellow metal that he offers his investors the opportunity to denominate their shares in gold.
This isn’t sound portfolio management; it’s gambling. Why politics and investing don’t mix. Why politics and investing don’t mix Washington Post Sunday, February 6, 2011; G06 Barry Ritholtz> Washington, I’m here to tell you, politics and investing don’t mix.
Yep, I thought I’d begin our conversation about investing by rocking your most cherished beliefs. Many of you are active in party politics, work for government or are involved in related fields. Well, I have some bad news: Your politics are killing you in the markets. In my work, I use behavioral psychology, statistics, cognitive biases, history, data analysis, mathematics, brain physiology, even evolution to make better investing decisions.
We humans make all the same mistakes, over and over again. And it’s no surprise. It’s akin to brain damage. To neurophysiologists, who research cognitive functions, the emotionally driven appear to suffer from cognitive deficits that mimic certain types of brain injuries. This cognitive bias is not an occasional problem – it is a systematic source of errors. And now you are.
Plan not to Panic. “Plan not to panic” next time your stock portfolio drops 40%.
That was billionaire hedge fund manager Joel Greenblatt’s advice for the little people in a column on his Magic Formula investing site last year (by the way, Virginia, there are no magic formulas). So what did Greenblatt do when Mike Burry, a hedge fund manager Greenblatt’s Gotham Capital invested with, was down 18% in 2006 (after several years of spectacular returns), due to early, illiquid bets against subprime mortgages — bets that Burry wanted to hold to fruition? From p.190 of Michael Lewis’s book, The Big Short, Immediately [...] Gotham Capital threatened to sue him.[...]What distinguished Gotham was that their leaders flew out from New York to San Jose and tried to bully Burry into giving them back the $100 million they had invested with him. Flash forward to the end of 2007. Diversifying among a number of different stocks reduces idiosyncratic (i.e., stock-specific) risk, but not market risk.
Howard Marks / Oaktree.