Equity markets are fundamentally unknowable. If markets and/ or investments lent themselves to rational analysis in any significantly predictive way, somebody (or more properly, somebody’s computer) would have perfected that analysis long since and would have taken away all the chips of everybody else at the table.
This has not happened. And if it hasn’t happened by now- with every computer nerd in the washing through his computer every recorded trade since the Assyrians swapped wheat to the Babylonians for bronze- it is not going to happen.
The secret is: there is no secret.
No matter how much you know, you still can’t prove what’s going to happen in the future.
And the more you try to prove what’s going to happen, the more you put yourself in an obviously false position.
Once again: no one can, with any precision, give knowledge of the future.
The battle we fight is not one of knowledge vs. ignorance, but of faith vs. fear.
Your belief system is your sword and your shield in the Crusade of faith vs. fear.
I have just listed some of my core beliefs about investing.
1. I believe that the fundamental investment risk is not losing one’s money, but outliving it. In the last 30 years, consumer prices have more than quadrupled. Risk is not a loss of principal, but of purchasing power while you’re still alive.
2. I believe, therefore that the only safety lies in the accretion of purchasing power. I define accretion of purchasing power as a positive return from my investments, net of inflation, and taxes.
3. I believe that the great long-term risk of stocks and/ or mutual funds is not owning them.
4. I believe that everything you need to know about the movement of stock prices can be summed up in eight words: the downs are temporary; the ups are permanent.
5. I process the experience which most people describe as a “bear market” in two different words: BIG SALE.
6. I don’t believe in individual stocks, I believe in managed portfolios of stocks and/ or a mutual fund. I can break a pencil; I cannot break 20 pencils tied together.
7. I believe that rupee cost averaging will make the dumbest person in the world wealthy.
10. I believe that people should own as close to 100% equities as they can emotionally stand.
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