The post 11 Things I Learned About Investing on the Alchemy of Money substack provided an excellent restatement of many of the important central tenets of successful investing, and backing them up with quotes from some of the greatest money managers of all time.
A discussion about the obsessiveness of top investors was among the more notable observations in the piece. It includes a comment by legendary hedge fund manager Stanley Druckenmiller who said, “This business is so invigorating to certain individuals, they’re going to work 24/7, and you’re competing against them. If you’re with people doing it [solely] for the money, you’re going to get run over.”
The lesson is that great investors not only study and understand markets but love doing it. I witnessed this trend a lot while working in finance where the sheer volume of obsessive behaviour, professional and personal, was too extensive to fully keep track of.
The post also recommends that investors remind themselves that they are not the next Warren Buffett. The greatest investors often have highly unusual character traits – extreme patience or tolerance for risk, for example – that the average investor can’t replicate.
It is also important to distinguish the difference between the practice of investing and the business of investing. The first involves buying and selling of assets while the latter is a service that profits from those doing the former. The implication is that investing advice from the finance industry should always be analyzed for bias – they make more money the more trades we do.
Investors can be successful with wildly different perspectives on markets. Warren Buffett, for instance, doesn’t believe much information can be gleaned from daily markets while other managers are entirely dependent on interpreting market signals.
The column also includes what makes George Soros arguably the greatest trader of all time, the dangers of being in a hurry as an investor, and the importance of not going to work every day (as an investor). I highly recommend reading the post in its entirety.
-- Scott Barlow, Globe and Mail market strategist
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The Rundown
Gold mining ETFs fail to keep pace with benchmark bullion fund
The weakening of a long-established correlation between the price of exchange-traded funds tied to gold and gold mining stocks have investors eyeing a range of potential causes, including massive buying from global central banks and shortfalls in gold production, reports Reuters.
Pause in interest rate increases should help refresh portfolios
While monetary-policy actions do take time to have their desired effect on the economy, typically between six and eight quarters, there is mounting evidence that such a slowdown is occurring. And that means the time to take another look at some of the most beaten-down equity sectors is now, says wealth manager Lawrence Ullman.
Investors turn risk-on for some junk debt but not all
In recent days, as it started to appear that the Fed rate- hiking cycle might have peaked, investors showed more willingness to dip their toes back into junk-rated bonds. But as Reuters reports, they are going only as far as the safest bets in the junk category, bonds rated BB and B. The riskiest credits, rated CCC or below, are still shunned.
Also see: October suddenly looks like a bad bond dream
Growing risk in Italy puts its equities at deepest discount in 35 years
Italian stocks are trading at their deepest discount in 35 years compared to world shares as investors fret over the fiscal outlook in one of Europe’s most indebted economies, although some reckon the shares are too cheap to ignore.
Others (for subscribers)
Wednesday’s Insider Report: Eric Sprott adds to the largest investment made in his career
Tuesday’s Insider Report: Director buys this rail stock near its 52-week low
Wednesday’s analyst upgrades and downgrades
Tuesday’s analyst upgrades and downgrades
Globe Advisor
How investors can get a taste of sustainable food systems
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Ask Globe Investor
Question: Financial columnists always talk about how investments perform in the long term. For example, over many decades, stocks tend to outperform bonds. However, I wonder if we’ve reached the stage in world events when we can no longer confidently count on there being a long term. Wars, continuing climate catastrophes, pandemics and the like might well bring down economies for a very long time. Or, in the worst possible case, in which several disasters occur simultaneously, there might not be a long term at all. Is it time for the investment world to stop talking about the long term as if it were a sure thing?
Answer: First, thank you for the cheerful message.
Kidding aside, I think most people would agree that the world is facing some serious, even unprecedented, challenges. I could add a few other items to your doomsday list, such as growing income inequality, housing unaffordability, food insecurity, cybercrime, artificial intelligence, rampant disinformation, political radicalization and growing authoritarianism around the world.
But before we get too depressed, let’s back up for a moment and explore why financial pundits recommend focusing on the long term. There are a few reasons, which I get into here.
--John Heinzl (E-mail your questions to jheinzl@globeandmail.com)
What’s up in the days ahead
The Contra Guys are pondering a purchase of shares in the Bank of Nova Scotia. They’ll explain why its dividend is just too good to pass up. Plus, bond fund manager veteran Tom Czitron looks at the potential buying opportunities in preferred shares.
Click here to see the Globe Investor earnings and economic news calendar.
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Compiled by Globe Investor Staff