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Good quote to file away

“When an investor focuses on short-term investments, he or she is observing the variability of the portfolio, not the returns – in short, being fooled by randomness." – Nicholas Nassim Taleb

Comments

  • brilliant.

  • Rick's Corollary: "Most investors first, if not only, focus on the potential profits -- but those who survive first consider the potential risk."

    *cough* crypto, MBS, CDOs, etc, etc, etc. *cough*
  • “When an investor focuses on short-term investments, he or she is observing the variability of the portfolio, not the returns – in short, being fooled by randomness." – Nicholas Nassim Taleb

    So short term t-bills are a bad investment , & long term okay ?
  • Great quote @Mark. In general that quote has the same meaning in all processes. It's a rule for statistical process control in manufacturing which was the basis of my working career.

    Trying to make constant adjustments to short term events can negatively impact investment return. A similar phrase everyone has heard, "can't see the forest for the trees".
  • I guess it depends on your definition of short-term.
  • edited December 2022
    Good quote. We’ve all heard many of his others: Like “Rule #1 - Don’t lose money … Rule #2 - Never forget rule #1.”

    Elsewhere he’s said you shouldn’t buy anything you’re not comfortable holding for 10 years. It strikes me that one’s a bit problematic for some of us post-75. But if it was a guaranteed way to prolong one’s life for 10 more years, I’d buy a bunch of whatever it was.

    Volatility in a particular holding is fine with me. Have a couple mining stocks that bounce up and down by 5-8% on an almost weekly basis - sometimes that much in a single day. But if your entire portfolio were moving by that amount, and if you were taking distributions to live on from those investments (not some cash reserve), it might drive you nuts.
    -

    FWIW - Here’s a 60-second video of a much younger Buffett summarizing his views on investing. Some might be interested ….




  • "He who panics first, panics best" as well..."There's no shame in getting off with the women and the children..."

    Example real world scenarios..."Ftx is fine ...". How about housing collapse...Bernake.."This is contained to the housing market...".

    Just for kicks and giggles (take it easy, relax)...."The economy is damn strong..."
  • MikeM said:

    Great quote @Mark. In general that quote has the same meaning in all processes. It's a rule for statistical process control in manufacturing which was the basis of my working career.

    Trying to make constant adjustments to short term events can negatively impact investment return. A similar phrase everyone has heard, "can't see the forest for the trees".

    @MikeM - That’s the best explanation of volatility I’ve ever heard. Thanks loads.
  • "Trying to make constant adjustments to short term events can negatively impact..."

    Another common corollary offshoot: "If it works, don't f___ with it."
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