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Three Investment Tips You Don't Often Hear Out There

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It seems that, when it comes to stretching your money to the maximum, there is nothing new when it comes to investing, especially in the stock market. The same tips and strategies are repeated over and over againand rightly so in most cases, as they are the most sensible.

But since this is widely seen, I'm going to do a little counter exercise, showing a series of investment advice that is usually not heard out theresince they do not follow the usual line.

That yes, What we are going to see should be taken for informational purposes only. and intellectual, to think a little beyond the usual. It is true that they all have a meaning and even some data that support them, however, in no way represents advice of any kind and I don't even follow it almost never.

I'm actually pretty boring and long term in this type of investment, where said boredom is usually a friend of the result over time.

These are the four investment tips I plan to give my children

My aim is also to show that this game is not about absolute truths, but of nuances and subtleties whose usefulness depends on the situation and the specific moment. The nuances and subtleties, what died the day the Internet was born.

Let's start with the first tip, sacrificing the sacred cow of everything they teach you in Economics, Stock Exchange or business.

1. Forget diversification, at least if you want to earn more than a beer

Not diversifying leads to greater profitability

I think almost everyone here knows the most basic investment advice, diversification, summed up in: «Don't put all your eggs in one basket». Logic is good for this, distribute investments well, so that if you lose in something, the rest compensates and you don't end up with a risky position in a few values.

Oh, and don't forget to put a big pinch on some boring title, now that interest is back, or on that company that breathes since 1800 and grows 1% a year.

Good advice not to miss it, but it turns out that not losing and winning are not exactly the same on many occasions.

Forgetting to diversify is a recipe for earning more for one simple reason: hundreds of years later, Pareto is still right. Most earnings come from a few actions in many cases and to distribute it far and wide is to take its wealth and condemn it to the fact that the greater part contributes almost nothing, neither for good nor for evil.

Especially if you don't have a lot of capital to invest, diversification is a recipe for slow performance.

What to do then?

An investment focused on the most profitable securities that Pareto would be proud of, something that we need a deep knowledge of the market and the activity in which we will invest.

Because, of course, the essential thing is to detect and be clear about these values, because, as with all advice that is useful for something, they are much easier in theory than in practice.

Investors so little suspicious of nonsense, such as Warren Buffet and Charlie Munger, recommend opening the window and launching diversification through it, which they described as crutch to compensate for ignorance or of "protection against ignorance» in relation to the market.

I leave here a quote from Munger in 2005 that summarizes his point of view and the reason for the advice:

Berkshire-style investors tend to be less diversified than others. Academics have done seasoned investors a disservice by glorifying the idea of diversification. Because I think the whole concept is literally almost crazy. He emphasizes the fact that he feels good because the results of his investments are not far from the average results of the market. But why would you climb into such a cart if someone didn't force you with a whip and a gun?

Having said that, which is very sensible, I will now say the opposite.

2. Don't learn about the market, copy and that's it

Copying Securities can be a good investment strategy

The previous premise is fine, but some of us have jobs and lives, even if it doesn't seem like it, and it turns out that everything is much more complex than it seems at first glance. In other words, to detect these few prior values systematically takes more experience and knowledge than many believe.

Also, in this game, there will always be someone who knows and earns much more than us, just like in the Wild West there was always a faster gunslinger.

So don't learn, it's much better copy the best and that's it.

Some investment platforms, in fact, announce this possibility, that of imitate the movements of famous investors They get good returns.

Once again, there are a thousand nuances to discuss that don't fit in the space you leave me. Personally, I would say a few things against it, but today I'm playing devil's advocate and it's true that some preliminary data seem to support that, as a general strategy, it gives better results than the average.

Of course, as in the concentrated values of the first council, in this you have to choose very carefully who you copywhich is the crux of the matter.

Or perhaps, instead of doing that job, the following unusual investment advice was another.

3. Invest blindly and that's it, total, it seems that nobody has any idea

Monkeys and Stock Market Experts, the former usually win

I talked about learning a lot, after all the opposite, and now I'm going to kill them both at once, saying that maybe some unusually good investment advice is that choose values blindly.

You know, throw a dart, draw a bingo ball or any other random system.

In 1973, Professor Burton Malkiel of Princeton University wrote in his book A Random Walk on Wall Street what a blindfolded monkey could match the profit specialists when investing in the stock market.

In 2013, Rob Arnott, CEO of Search AffiliatesHe proved me wrong testing that the monkeys did not equal the experts, but surpassed them.

For this, he performed a test by randomly choosing 100 wallets with 30 quotas, from a total universe of 1,000 possible values.

So he repeated this process every year, no less than from 1964 to 2010and observed the results, replicating the “100 blindfolded monkeys” randomization.

The conclusion was that, on average, 98 of the 100 “monkey” portfolios outperform in capitalization to the market.

Interestingly, it was not the first such experiment. He Wall Street Journal he also wanted to know if Malkiel was right, and he did something similar, comparing the performance of “monkeys” (random investment), amateur and professionals.

After 3 competition stages, between 2000 and 2001this was the rating:

  1. Monkeys with +13.3 points.
  2. Specialists with +4.4 points.
  3. Amateurs: -81.22 points.

Crazy, but the truth is that more results of this style have also been seen, or even above-average profitability using decision criteria as strange as Scrabble.

The explanation is largely purely mathematical, not magical, but it does give a lot of food for thought about experts, biases in the application of knowledge, and realities. So much so that in a future article We'll take a closer look at why monkeys make better investors, plus something more surprising. about the “experts”.

Obviously, we must not take them as commandments written in stone, or even as our compass, but There's Wisdom Locked In These 3 Eccentric Tips. Because life is about those nuances and subtleties that I was talking about at the beginning, and the key is usually in the details.

So there are no tips that always work, but sensible general guidelines that should be ignored at certain times, once we know and master the rules of the game well.

For example, there is also the advice of buy the dip or buy during the drop in value. Absolutely not in many cases.because the value may not recover or it may leave money trapped in a winter that never ends, that the old people of the place still remember who bought it to dive infinite Earth, for example.

Many won't even know what I'm talking about, they don't miss anything either.

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