Every so often we will stumble upon a great article, with excellent material that would be crazy not to share. I recently came across a piece, written by Barry Ritholtz, where he talks about his goal of eliminating distractions from his portfolio and his life. He came up 10 things he needs to recognize to reduce noise. We find ourselves preaching many of the same points he makes. Trust me, there is a lot of noise that can be eliminated and this list is just the tip of the iceberg when it comes to things you should understand to reduce noise, and help you make sound investment decisions.

More Signal, Less Noise

  1. New is Old – it is misnamed and not especially forward looking;
  2. Data first and foremost; avoid the anecdotes and narratives;
  3. Everyone talks their books (i.e., what’s their agenda?);
  4. Recognize what financial chatter is merely idle gossip;
  5. What is within your control? What is not?
  6. Understand empiricism and probability analysis;
  7. Eliminate all sources that are biased, or are not driven by your goals, or have a different agenda; (delete money losers with Extreme Prejudice);
  8. Understand the concept of time, and the long game;
  9. Separate what is for Fun and what is for Real;
  10. Refining your process is your goal. Get that right and the outcomes will improve naturally;

In a follow-up article the author decided to create an anti-list, of exactly the wrong things to do as an investor. To me, this list is incredibly powerful. I found myself laughing at a few of them, not because they were ‘haha’ funny, it was more of a nervous laugh because the list describes the way so many people make investment decisions.

How to Get More Noise & Less Signal

  1. Mainstream media is an excellent source of actionable trading & investing ideas. Especially financial television. You should uncritically consume even more of it.
  2. Data is overrated. Go with anecdotes from people you know personally and your gut instincts.
  3. Pundits and TV guests are there to help you reach a comfortable retirement. They have no other agendas.
  4. The most important information about the stock market—especially about when to buy or sell—is known only to handful of insiders. Envy them (and blame your losses on not being in the circle).
  5. You need to exert lots of energy, spend lots of time, and create lots of stress about the following: The Federal Reserve, the Dollar, Congress, Inflation, Sovereign Bank Debt in Europe, Peak Oil, China, Deflation, Austerity in the UK, and the Hindenburg Omen.
  6. Don’t worry if you are not good at math or science; empiricism and probability analysis are vastly overrated (they are for geeks anyways); what’s mean reversion?
  7. Focus on the news sources that are in sync with your own political views and opinions and investment postures. Do not read anything that challenges your pre-existing beliefs. Besides, analysts and websites and fund managers that have been wrong for years are due for a winner!
  8. Short term trading is where it’s at! Don’t worry about the long term—it’s way off in the future. Measure your success in minutes and hours, not years and decades.
  9. There is no reason that you cannot also have a good time with your retirement account; that’s what it’s there for anyway.
  10. Never listen to those people with good long term track records who have had a losing trade or a bad quarter. It’s all about recent performance!

Both of these lists are timeless! They could have been written 100 years ago, and they would have held true then (except for the TV part), just as they hold true today, and will hold true into the future.

 

Are you looking for life-long financial planning support beyond traditional wealth management? Then Del Monte Group is the right place for you. At DMG, we address a client’s entire lifestyle to help make all goals become a reality–even if they aren’t directly related to money. Our clients are more than just assets and investments. They are human beings with their own stories, and they are our family. So, when you’re in the greater Alamo or Danville, California area our door is always open to assist you in person Call us at 925.736.6410, send an email to Info@APlaceOfPossibility.com, visit APlaceOfPossibility.com/Calendar to get your meeting on the books. We can't wait to help you.

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