I earned my Chartered Financial Analyst (CFA®) designation a long time ago. Many of the required readings were authored by Charles D. Ellis, an icon in the investment industry! He just came out with a new book titled, Rethinking Investing: A Very Short Guide to Very Long-Term Investing. In his own words, “At my advanced age, I’ve been around for a long, long time… I put down everything I thought was important for someone to know, and it only took 100 pages!”
CNBC aired a 10-minute interview with him where he highlighted many of the key points in the book. Readers of this blog will be well aware of some of these truisms that I have often written about. Aside from a key point about minimizing investment expenses by using low cost passive ETFs as a way to improve “net” investment return, the most important takeaway is the fact that it is almost impossible to time the market!
The following slide highlights the key facts supporting this assertion. Simply, if you are out of the market on the 10 best days over the past 36 years your average annual compound return declines from +11.4% to +9.2%; the best 20 days it goes down to +7.7%, and the 30 best days it goes down +6.4%! Interestingly, these “best” days often occur after “worst” days making the timing action even more painful if they are missed. And, no one knows when the “best” days will occur!
Ellis went on to highlight the behavioral biases that negatively impact investment success. These include things like overconfidence, jumping to conclusions, herd mentality, anchoring, and the endowment effect. Listen to the video link for more info on these.
Finally, the following bullets summarize his keys to successful investing:
· Personal discipline to save
· Long term focus
· Benign Neglect: most actions do more harm than good
· Act consistently with long term goals
Dattilio & Ash is committed to the highest level of investment professionalism as an investment fiduciary and heartily agrees with the points made; they are well worn and timeless. D&A works with its clients to understand their financial situation and risk tolerance and then structures an investment portfolio to help them achieve their goals.