Posts filed under “Rules”
Michael Steinhardt was one of the most successful hedge fund managers of all time. A dollar invested with Steinhardt Partners LP in 1967 was worth $481 when Steinhardt retired in 1995.
The following six rules were pulled out from a speech he gave:
1. Make all your mistakes early in life: The more tough lessons you learn early on, the fewer (bigger) errors you make later. A common mistake of all young investors is to be too trusting with brokers, analysts, and newsletters who are trying to sell you something.
2. Always make your living doing something you enjoy: Devote your full intensity for success over the long-term.
3. Be intellectually competitive: Do constant research on subjects that make you money. Plow through the data so as to be able to sense a major change coming in the macro situation.
4. Make good decisions even with incomplete information: Investors never have all the data they need before they put their money at risk. Investing is all about decision-making with imperfect information. You will never have all the info you need. What matters is what you do with the information you have. Do your homework and focus on the facts that matter most in any investing situation.
5. Always trust your intuition: Intuition is more than just a hunch — it resembles a hidden supercomputer in the mind that you’re not even aware is there. It can help you do the right thing at the right time if you give it a chance. Over time, your own trading experience will help develop your intuition so that major pitfalls can be avoided.
6. Don’t make small investments: You only have so much time and energy so when you put your money in play. So, if you’re going to put money at risk, make sure the reward is high enough to justify it.
This report was originally published by The Kirk Report on June 2, 2004.
This comes from a math blog by a teacher called WITHOUT GEOMETRY, LIFE IS POINTLESS (get it?).
There is a recent post I wanted to reference — Habits of Mind — that was originally written for math students. With a few small changes, it can be readily adapted to thinking about markets, risk, investing, etc.
Have a go at it:
Habits of mind
1. Pattern Sniff
. . .A. On the lookout for patterns
. . .B. On the lookout for shortcuts
2. Experiment, Guess and Conjecture
. . .A. Can begin to work on a problem independently
. . .B. Estimates
. . .C. Conjectures
. . .D. Healthy skepticism of experimental results
. . .E. Determines lower and upper bounds
. . .F. Looks at small or large cases to find and test conjectures
. . .G. Is thoughtful and purposeful about which case(s) to explore
. . .H. Keeps all but one variable fixed
. . .I. Varies parameters in regular and useful ways
. . .J. Works backwards (guesses at a solution and see if it makes sense)
3. Organize and Simplify
. . .A. Records results in a useful way
. . .B. Process, solutions and answers are detailed and easy to follow
. . .C. Looks at information about the problem or solution in different ways
. . .D. Determine whether the problem can be broken up into simpler pieces
. . .E. Considers the form of data (deciding when, e.g., 1+2 is more helpful than 3)
. . .F. Uses parity and other methods to simplify and classify cases
. . .A. Verbal/visual articulation of thoughts, results, conjectures, arguments, etc.
. . .B. Written articulation of arguments, process, proofs, questions, opinions, etc.
. . .C. Can explain both how and why
. . .D. Creates precise problems
. . .E. Invents notation and language when helpful
. . .F. Ensures that this invented notation and language is precise
While I am not a fan of most big firm fundamental analysts, over the years, Merrill Lynch has had some sharp guys in their Chief Strategist/Economist positions. Here are some lessons and rules from 3 of them. Richard Bernstein was “notoriously cautious on stocks for much of this decade” — and was very bearish on…Read More
“This book will convince you of the single most important fact about stocks at the dawn of the twenty-first century: They are cheap….If you are worried about missing the market’s big move upward, you will discover that it is not too late. Stocks are now in the midst of a one-time-only rise to much higher…Read More