What do you think makes a successful investment strategy?
Here is the story of Sue, Jim and Tom.
Sue invests $1 every month into the US stock market each month. No matter a recession or inflation. She just continues to invest from 1900 to 2019.
Jim invests $1 in stocks when the economy is not in recession and saves monthly dollars in cash and invests back when the recession ends.
Tom invests $1 in stocks when there is no recession, sells 6 months after the recession begins, and invests back in 6 months after the recession ends.
How much money do you think these three end up the period?
Sue – $435,551
Jim – $257,386
Tom – $234,476
A lot of things in investing, or business work based on long-tails
The farthest ends of a distribution of the outcomes have tremendous influence.
Just over 300/1428 months were in recession.
By keeping her cool during the 22% of time, Sue ends up with 3/4th more money than the other two.
A good definition of an investing genius is the man or woman who can do the average thing when all those around them are going crazy.
This is from this brilliant book – The Psychology of Money
It argues that doing well with money isn’t necessarily about what you know.
It’s about how you behave. And that is hard to teach 🙂
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