The Nine Most Important Things I’VE Learnt About Investing Over The Past 35 Years

I have been working in and around investment marketplaces for 35 years now. A whole great deal has happened over that time. The 1987 crash, the recession Australia needed, the Asian crisis, the tech boom/tech wreck, the mining boom, the Global Financial Crisis, the Eurozone crisis. Financial deregulation, financial deregulation.

The end of the cool battle, US domination, the rise of Asia and then China. And so on. But as someone once observed, the more things change the more they stay the same. And this is specially true with regards to investing. So, what I have done here’s put some thought into the nine most important things I’ve learned over the past 35 years. Droll as it sounds, the main one big thing I have seen again and again before 35 years is that investment markets constantly go through cyclical phases of good times and bad. Some are short term, year business cycle such as those that relate to the three to five 5.

Some are longer, year periods in shares like the secular swings seen over 10 to 20. Some get stuck in certain phases for long periods. Debate is unlimited about what drives cycles, however they continue. But all eventually support the seed products of their own reversal. Ultimately there are absolutely no such thing as new eras, new paradigms, and new normal as everything must pass.

What’s more talk about marketplaces often lead financial cycles, so financial data is often of no use in timing turning points in shares. What’s more is these cycles in markets get magnified by bouts of investor irrationality that take them well from fundamentally justified levels. This is rooted in investor psychology and moves from a range of behavioral biases traders suffer from.

These include the tendency to task the current condition of the world into the future, the propensity to look for evidence that confirms your views, overconfidence, and a lesser tolerance for losses than gains. So, while basics may be at the core of cyclical swings in markets, they are generally magnified by trader psychology if enough people suffer from the same irrational biases at the same time. From this it follows that the actual investor crowd is doing is often not good that you can do too.

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We often feel safest when investing in a secured asset when neighbors and friends are doing the same and press commentary is reinforcing the message that it’s the right thing to do. This “safety in numbers” strategy is often doomed to failure. The cheaper you buy an asset the higher its prospective return.

In central banking parlance, it is named the exchange rate “stance” if you want. A posture is used by you. It becomes a sign to the world. The signal is clear Once, the global world understands what to do. For central bankers who would like a quiet life, the best thing is to say nothing. To provide no hint to the marketplace, so the market cannot speculate against it.

If there is nothing happening, the market ignores the ringgit. There is absolutely no engagement. How will you think the ringgit can stay “so steady for so long”? We are being ignored. The few transactions in the local forex market, for trade purposes, is not just a free market really. It really is a provincial market in some forgotten town.


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