The Same Great Financial Advice As Always

Two posts brought this on.  It’s just the most basic, tried and true advice.

Motley Fool starts from an interesting viewpoint – to succeed, look at how people fail.

Here’s what I’ve learned from failures about the easiest ways to ruin your financial life.

1. Risk what you to need in order to gain what you don’t need

Warren Buffett was once ridiculed by a group of billionaire hedge fund managers who bet the farm and went bankrupt.

“To make money they didn’t have and didn’t need, they risked what they did have and did need,” he said. “And that’s foolish. It is just plain foolish. If you risk something that is important to you for something that is unimportant to you, it just does not make any sense.”

2. Anchor expectations to the most successful people you know

Step One is realizing that the correlation between money and happiness is probably a fraction of what you think it is. Step Two is realizing that wealth is the money you’ve saved, which people don’t see, not the stuff you’ve bought, which they do.

3. Have a life expectancy measured in decades and an attention span measured in minutes

4. Pay close attention to everything

According to investor Jim O’Shaughnessy, Fidelity Investments once ran a study to see which types of Fidelity investors performed best.

The winner?

“The accounts of people who forgot they had an account at Fidelity.” O’Shaughnessy said.

These people weren’t checking their accounts, fiddling, buying, selling, rotating, adjusting, or tweaking. They just let their money grow in blissful ignorance. And they did phenomenally.

In contrast, several studies have shown that those who trade the most perform, by far, the worst.

That Warren Buffett quote applies to a lot more than money, by the way.

Ben Carlson has a nice post about Thomas Dorsey and how his firm has been successful, and this contains one of the other keys to financial success:  Find a strategy that has been working in the long term (typically over long time periods and in separate countries, markets, and even types of assets) and makes sense.  Be sure you understand your strategy’s strengths and weaknesses, and then stick with it!  Thomas Dorsey uses a rules based momentum strategy, and it works.  I’m not endorsing his firm or strategy as ideal, or even necessarily efficient or appropriate.  And of course it could quit working at any time.  But if he had not done his homework, and most importantly, stuck to the discipline, he would definitely not be as successful.


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