Jeremy Grantham’s quarterly GMO letter is out. It is a long rambling look at everything from Tesla to Fracking to Fertilizers to Food.

But the narrative culminates with how as a young lad, Grantham made a trade based on a neighbor — legal inside information. He explains how that worked out, via his 8 lessons learned during his tenure on Wall Street.


Investment Lessons Learned: Mistakes Made Over 47 Years

1) Inside advice, legal in those days, from friends in the company is a particularly dangerous basis for decisions; you know little how limited their knowledge really is and you are overexposed to sustained enthusiasm.

2) Always diversify, particularly for your pension fund.

3) Fraud, near-fraud, or colossal incompetence can always strike.

4) Don’t buy stocks yourself if you’re an amateur: invest with a relatively rare expert or in a low-cost index.

5) Investing when young will start your brain turning on things financial.

6) Painful errors teach you more than success does.

7) Luck helps and finally…

8) Have a convenient mother to be the fall guy.

Good stuff!


Year-End Odds and Ends

Category: Investing, Psychology, Rules

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3 Responses to “Jeremy Grantham: Mistakes Made Over 47 Years”

  1. constantnormal says:

    #6 (“Painful errors teach you more than success does”) is true only if one works hard at learning what the errors actually were, how you came to commit them (usually some structural character flaw, difficult to overcome), and manage to alter your behavior so as to reduce the incidence of such errors in the future … it is a long and arduous task, as people are exceedingly difficult to change and the set of possible errors is infinitely large and constantly changing … but the learning that accrues, even if partial and inconstant, is priceless …

    • rd says:

      I have run into a number of people over the years who can use pretzel logic to deflect blame away from themselves in their own minds. As a result, they tend to make the same errors repeatedly but are usually good enough politicians to not get too much stuck to them. I work very hard to keep them more than arm’s length from me because involvement with them is more likely to result in an event and they will be focused on having the splatter end up on you instead of them. Hmmmm… sounds like the banking sector over the past decade. Life is too short for that on a repeated basis.

  2. intlacct says:

    He has successfully invested longer than many of the ‘geniuses’ have been alive.
    I don’t know if he is right about commodities and spaceship earth but I would give him the benefit of the doubt…