Posts filed under “Markets”
Hedge fund manager Doug Kass gives people some needed reminders:
1. Above all, do your own homework! Do not rely on television
commentators, strategists, biased money managers (who are talking their book!) in your decisions. Do your own
research. Use the significant resources on the Internet to
2. Use old-fashioned common sense! If things look too good, they
probably are and will turn down. If things look too bad, they
probably will turn around and improve.
3. Don’t be afraid to be a contrarian — in small doses! When everyone
(and their entire family) is long a sector or is avoiding a sector (and is
exceptionally glib about it), it should be a sign to go the other way.
4. Let your gains run and stop your losses! — Don’t average down.
5. Be a cynic and remain skeptical even when the good times are
apparent! This especially true as it relates to government statistics.
6. Let speculation be your guide! If investors all around you are
losing their heads, don’t lose yours.
7. Read and reread the classic
books on investing! In bull markets, the historical perspective is
disregarded. But in bear markets, or
volatile markets, the history lessons are invaluable as market
conditions/influences are nearly always repeated.
8. When times are tough (like the present), do not press your investments
and do not overtrade! Mr. Market will be back up and running tomorrow …
and the next day.
9. In uncertain times do a simple piece of homework: Reassess why you own
each investment! Omega Advisors’ Leon Cooperman taught me to draw a line in
the middle of a page and list how you view the assets and liabilities for the
markets and for each individual investment.
10. Do not forget point #1!
Ten Lessons to Be Learned in
the Recent Market Decline
Street Insight, 10/6/2005 7:43 AM
Among individual investors, David Swensen isn’t a household name. But he is an icon in the world of big institutional money managers such as endowments and pension funds.
Mr. Swensen’s fame comes from his oversight of Yale University’s $15 billion endowment fund, which, since he was hired 20 years ago, has returned an average of 16% a year, far outpacing the market and other funds run for universities. Before arriving, Mr. Swensen had never overseen an institutional portfolio, and he brought to the job an unconventional approach for dividing up the portfolio among different asset classes. He is now Yale’s chief investment officer.
Five years ago, Mr. Swensen set out to write a book that would bring the lessons he learned to individual investors. Instead, he says he found that the option most accessible to individuals — mutual funds — often makes it impossible to beat the market. And even when they do find good managers, individuals end up shooting themselves in the foot, he says.
So while Yale relies on actively managed portfolios, Mr. Swensen says individuals should just stick to index funds, especially those run by not-for-profit companies. He also likes exchange-traded funds, which trade on exchanges like stocks, but says "buyer beware."
Excerpts from an interview with Mr. Swensen follow:
WSJ: You had hoped to give small investors a road map for beating the market based on Yale’s approach to investing. What happened?
Mr. Swensen: I found when I started down that path that individuals just don’t have the same set of investment opportunities available to them that we do here at Yale. In fact, the evidence showed me that the mutual-fund industry has completely failed to provide reasonable active-management returns to individuals.
WSJ: To say that it completely failed — that’s a pretty harsh statement to make.
Mr. Swensen: I think the evidence is there. The crux of the failure is with the for-profit management of funds for individuals. Mutual-fund managers have a fiduciary responsibility to investors. Obviously, if they are operating in a for-profit mode, they have a profit motive. When you put the profit motive up against fiduciary responsibility, that fiduciary responsibility loses and profits win.
continued below . . .
Yale Manager Blasts Industry
THE WALL STREET JOURNAL, September 6, 2005