20 Rules for Markets and Investing

Introduction

• Presenter: Charlie Blow
• Topic: 20 essential rules for markets and investing

Rule 1: Be Humble

• Importance of humility in investing
• Overconfidence leads to more trading and worse performance
• High turnover usually results in lower returns
• Men tend to be more confident than women, resulting in poorer performance

Rule 2: Don’t Trust, Verify

• Importance of skepticism
• Beware of too-good-to-be-true opportunities
• Example: Fairfield Century Fund and Bernie Madoff scandal

Rule 3: Play the Long Game

• Advantage of long-term investing
• Longer holding periods increase the probability of positive returns
• Compounding over decades leads to significant wealth

Rule 4: Every Time is Different

• No two market cycles are the same
• Historical bear and bull markets

Rule 5: Ignore Predictions and Price Targets

• Price targets are often inaccurate
• Have your own investment strategy

Rule 6: Embrace Risk

• Higher returns involve higher risks
• Historical returns of stocks, bonds, and cash

Rule 7: Buy the Haystack

• Avoid picking individual stocks
• Majority of individual stocks underperform
• Buying the market index is often more profitable

Rule 8: Fight the Fed

• Don’t overly focus on Federal Reserve policies
• No consistent correlation between Fed actions and market performance

Rule 9: Expect the Unexpected

• Markets do not follow normal distribution
• Fat-tail events occur more often than expected

Rule 10: Don’t Chase the Past

• Avoid recency bias
• Past performance is not indicative of future returns

Rule 11: Focus on Saving Before Investing

• Importance of saving for investing
• Start early to take advantage of compounding

Rule 12: Simplify Whenever Possible

• Complexity does not guarantee higher returns
• Passive and simple portfolios often outperform complex ones

Rule 13: Learn to Be Good at Suffering

• Most of the time, the market is in drawdown
• Better long-term returns often follow large drawdowns

Rule 14: Never Interrupt Compounding Unnecessarily

• Avoid pulling investments due to market panic
• Historical data shows significant losses when doing so

Rule 15: Tune Out the Noise

• Financial news and headlines are often noise
• Focus on long-term investment strategy

Rule 16: Respect Reversion to the Mean

• Volatility is mean-reverting
• Panic often leads to opportunities for buying

Rule 17: Know What You Own and Why

• Understand the purpose of each investment
• Helps in maintaining investment discipline during tough times

Rule 18: Diversify

• Importance of diversification to manage unpredictability
• Avoid concentration risk

Rule 19: Control Your Emotions

• Fear and greed can lead to poor investment decisions
• Avoid emotional reactions to market changes

Rule 20: Value Time Over Money

• Time is a finite resource
• Use financial independence to gain more time

---

• Conclusion: If you need assistance with your investment journey, reach out to Creative Planning.
• Subscribe for more content.