With a couple weeks left to the year, it’s time for a review.
Like last year, I spent most of 2018 sharing what I found in books, articles, interviews, etc. And like every year, I still have no clue why some posts get traction over others.
Big names certainly help, as you’ll likely notice below. But beyond that, the sort of randomness to it remains a mystery to me. Regardless of why, when it does happen, it’s always a nice surprise and I appreciate it!
The broad lesson from this year, much like every year, is this: The studying of strategies, factors, and allocations is pointless if you don’t have the prerequisite behavior to go with it. Compounding misbehavior, mistakes, and poor decisions are the easiest way to go broke. Doing the opposite (more often than not), finding a strategy you can stick with, one that fits your quirks (along with a regular saving schedule), is how to grow wealth.
The secret is there are no secrets. The lessons in the posts below span over 130 years. None of it is new or groundbreaking. It’s all grounded in common sense. Someone just said it differently enough to strike a chord.
Here are the most read posts of 2018:
B. H. Liddell Hart: Why We Fail to Learn from History – From one of the best books I read this year, Hart summarizes the many things we fail to learn from history, based on his years of writing on the history of warfare. His lessons in the book go beyond war into life, business, and investing.
Lying Liars that Lie with Data – Based on Darrell Huff’s How to Lie with Statistics and the easy manipulation of data, the post expands on an example from the book of manipulating average returns and adds a few questions worth asking to protect yourself from being misled.
The Price of Excellence – Investors happily pay a premium for “quality” or “excellent” stocks, but four studies suggest they should be buying the “unexcellent” stocks.
The Rise and Fall and Rise of Ben Graham – This is the story of Ben Graham’s first fund, how he barely survived the four year period starting with the ’29 crash despite “beating the market,” what he did wrong, and how it changed him.
Howard Marks and Seth Klarman on Being Prepared – Baron Rothschild once said, “The time to buy is when there’s blood in the streets.” Marks, Klarman, and Abrams explain exactly how they did it during a conference on October 2nd, 2008 — the day before Congress passed the bailout.
Peter Bernstein on Hidden Variety in Averages – Bernstein explains why market averages only offer a rough guide of what’s possible because hidden with the averages lies the lesson of variation. The consequences of relying too heavily on averages, while ignoring the hidden variety, can be devastating.
Howard Marks: The Importance of Second-Level Thinking – one the most important things from Marks’s aptly named first book, The Most Important Thing, is second-level thinking. Deciphering second-order consequences while everyone else is betting on first-order consequences is what separates great investors from the herd.
Seth Klarman on Risk Management – A risk-first process would keep a lot of investors out of trouble, if only they could stop focusing on outcomes — returns — so much. Klarman explains the key benefit of risk management is survival when unexpected surprises pop up, as they always do.
The Timeless Art of Investing from 1888 – The great thing about old books is the knowledge that very little has changed in over 130 years. Timeless investing advice is the same today as it was then because investor misbehavior is equally timeless.
Philip Carret on Forecasting Market Swings – Those that seek out some “infallible rule” to forecast the future and time the markets will be dissapointed to find out most “rules” rarely work twice in a row because no two cycles are exactly alike. As Phil Carret pointed out in 1926, investing is harder than that.
Buffett and Munger Explain How to Avoid a Bubble – From the start of the year, and partially inspired by the overuse of the word bubble, the post highlights what it takes to avoid a real bubble, according to Buffett and Munger.
How to Stop Being Your Own Worst Enemy (in Investing) – From one the better books I read this year, James Montier’s The Little Book of Behavior Investing explains how to deal with the biggest obstacle every investor faces — themselves.