“The only thing new in investing is the history that you don’t know.”
Paraphrased from Harry Truman
How much of investing is art, and how much is science?
It is much more science than your broker would like you to believe. Now SPECULATING – that’s an art, and one which I (and frankly, you) have no talent for. INVESTING involves optimizing long-term expected returns at the minimum level of volatility consistent with the clients need, ability, and willingness to take risk…and while many advisors will disagree about the precise allocations to achieve that goal, the academic solutions to that problem are well understood.
Some hints:
- keep expenses low
- don’t time the market
- take advantage of small/value risk premiums
- diversify
- avoid risk in fixed income
- proactively manage taxes
- if it promises return without risk…run the other way
- And no – don’t fill up the vault with gold.
