Saturday, October 11, 2014

Jason Zweig: Good Advise Rarely Changes

Jason Zweig is a columnist on the WSJ, and I would argue probably one of the most influential writers in the modern finance world.


The very first finance book I read was the version of "The Intelligent Investor" with his foreward. I am now halfway stuck reading his behavioral finance book called "Your Money & Your Brain", which is a great book about the human aspect of investing. Put aside your calculators and spreadsheet, this book is a great book to understand the less quantitative, but still very important, part of investing.

I was also quite impressed with his interview on WealthTrack with Conseulo Mack. He is very cool and clear headed throughout the interview, which to me, shows that he is totally familiar with all the topics and has firmly given deep thought about them. I quite like this guy.

I was very very pleasantly surprised to stumble upon and read one of his dated articles on WSJ. I think this article is one of the most brutally honest pieces about a guy sincerely trying to impart his wisdom to people who can only better themselves by hearing it. This article is a gem, and I implore anyone, ANYONE looking to reign in their behavioral bias to give his article a full read and perhaps some weekend contemplation.

I am going to pick out my favourite lines from his article:

My job is to write the exact same thing between 50 and 100 times a year in such a way that neither my editors nor my readers will ever think I am repeating myself. That’s because good advice rarely changes, while markets change constantly...
The advice that sounds the best in the short run is always the most dangerous in the long run. Everyone wants the secret, the key, the roadmap to the primrose path that leads to El Dorado: the magical low-risk, high-return investment that can double your money in no time.
... research by the psychologist Paul Andreassen showed many years ago, people who receive frequent news updates on their investments earn lower returns than those who get no news...
From financial history and from my own experience, I long ago concluded that regression to the mean is the most powerful law in financial physics: Periods of above-average performance are inevitably followed by below-average returns, and bad times inevitably set the stage for surprisingly good performance.
My role is also to remind them constantly that knowing what not to do is much more important than what to do. Approximately 99% of the time, the single most important thing investors should do is absolutely nothing.
But this time is never different. History always rhymes. Human nature never changes. You should always become more skeptical of any investment that has recently soared in price, and you should always become more enthusiastic about any asset that has recently fallen in price. That’s what it means to be an investor.
The longer the odds, the greater the obligation to try to beat them. That’s why I keep at it, even though I have profound doubts that most people will ever learn how to be better investors. I never expect everyone to listen; all I ever hope for is to get someone to listen.
In summary: Good advise doesn't change, and reduced to its simplest form, it is essentially: Buy low, sell high. Tune out the market noise, reference past history and look at the long term. If everyone is zigging, think about zagging. Everyone can't all be right together because the market is not a win-win system, it's a negative-sum system.
This is a good and timely reminder to myself to always look at the big picture and not get caught up in the small daily blips when you are long term investor. 
This probably should go up in the hall of fame, along with Bob Farrell's 10 rules, which I think is another set of excellent advice reduced to digestible and actionable bits for the average investor. I hope maybe people might want to consider bookmarking this page, or his article directly, and give it a read through if you're at the crossroads of a major financial decision or choice.

3 comments:

  1. i say you are on the right track:-

    "Good advise doesn't change, and reduced to its simplest form, it is essentially: Buy low, sell high."

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    Replies
    1. Thanks temperament. It sounds simple, but it's not always so simple to execute it. I must constantly reminded myself about this!

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  2. Yes, 99% of the time doing nothing and yet keep watching over it is kind of torture, isn't it?
    How many of us can really do it?
    Not me.
    Maybe 60-70 % of the time?
    To achieve 99% of the time;
    Maybe buy and forget until you can hear someone shout "Fire" in the market.

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