Things to Avoid at All Costs

Keep your distance.

Jul 25, 2014 at 11:06AM


Drop everything and run when you come across ...

Feelings of certainty. They invariably come just before big surprises.

People who claim certainty. It's the most potent way to trick someone.

Risk-free returns. You'll end up with return-free risk.

People who have predicted 564 of the last two market crashes. And there are a lot of them.

Adjusting your risk-tolerance when stocks are either crashing or surging. It's the easiest way to make a financial decision you'll regret.

Putting 30 years worth of savings into something you spent seven minutes researching. You have no right to complain about losing money in an investment you put no effort into understanding.

Extrapolating the recent past into the future. Things always change. If your forecast doesn't, you're doing it wrong.

People who aren't willing to change their minds. Including yourself. Especially yourself.

Feeling smarter after the market goes up. You had nothing to do with it.

Explanations of what were likely random events. This means almost every market move that takes place in time periods less than one year.

Having political feelings within ten miles of your investment decisions. This is a common way smart people make dumb decisions with money.

Spending more time arguing why other investors are wrong than trying to figure out what you're doing wrong.

Spending the majority of your time in a job you hate in order to make enough money to spend part of your time in a life you don't hate.

Precision. Finance just doesn't work that way.

Impatience. It's the fastest way to disappointment. 

Investments you can't explain to a third grader. If you can't, you probably have no idea what you're getting into.

Assuming your past investing behavior isn't indicative of your future behavior. It's the best guide you have.

Assuming that the random life experiences you've had provide a complete view of the world. Everyone has their own version of history and it's a tiny reflection of reality.

Reliance on pensions, inheritances, Social Security, or the decisions of anyone other than yourself to make it through retirement. Few third parties care about your wellbeing decades from now.

Six-figure student loans before you're old enough to drink. This is starting out life with your hands tied behind your back.

Assuming investors who wear suits are smarter than you. Being a smart investor has little to do with education or job title and everything to do with behavioral traits.

Assuming intelligence in one field translates to being a smart investor. I doubt there's any correlation.

Assuming that bad investments you made were the result of bad luck and good investments you made were all skill.

Measuring investment fees in basis points instead of dollars. An advisor saying, "My fee is 100 basis points" sounds so much better than, "This will cost you $35,000 per year."

Feeling entitled to investment returns, a decent job, or predictability. 

Trading on margin. Most people can't handle market volatility without leverage.

Trading, in general. You're fighting randomness and computers that can solve a trillion problems before you can blink.

Worrying about things you can't control. Like what the Fed will do next, what the market will do next month, or whether earnings will beat expectations.

Avoid those, and most everything else should fall into place.

Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics. 

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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