7 Simple Lessons from 7 Years in Banking, Finance, Economics & Trading
1. Fees are the devil, period. Either learn how to manage your own investments or suck up the fact that you won’t beat the market
2. Free markets don’t exist. Every government on Earth has their hands in any pot they can get themselves into. They are either corrupt or stupid and will waste your money — or worse, prohibit citizens’ ability to acquire goods and services at fair market prices with laws and tariffs — every chance they get.
3. Slow money is smart money. Don’t chase fads or trends unless you are an agile, informed and attentive investment professional. By the time George Costanza or Betty Draper knows about a trend in the markets, the pro’s are positioning on the other side and plan to sell to the latecomers: retail investors.
4. If it sounds like a gimmick, it is. Trust you gut. Most people have the basic instincts required to suss out a charlatan. If you don’t, as PT Barnum would say, “… a sucker is born everyday” and ignorance is readily exploited. The pressure and expectations at large financial institutions demand bankers seize every opportunity, whether born from hard word and diligence or counterparty ignorance. Some more cliches for emphasis: KISS, there is nothing new under the sun.
5. Buying discounted securities and holding until they realize their full value is the only way to ensure you’re investing with a margin of safety and thus can rest comfortably knowing there is a reasonable chance of growing your capital over the long term.
5. Forecasting is biased, or worse, fabricated misdirection. Due to perverse incentives at large institutions [both public (central banks, think tanks etc) and private (banks)] or pure guesses. Some economists and portfolio managers can be trusted but it takes years to figure out who, and WHEN, advice should be embraced.
6. Financial service providers carefully toe the line between partnership and exploitation. They will extract as much as they can in fees while tactfully managing loyalty and client experiences.
7. Much of the dogma (or marketing) in the investment sphere is not supported by recent academic literature. Efficient markets, risk = return, time in the market vs. time out of the market. The primary findings by many academics who review investment fund performance: fees destroy most returns, markets (prices) follow a random walk and pricing inefficiencies abound in all corners and in most asset classes.
Disclaimer: I was institutionalized at the Bank for closer to 6 years than 7, but the headline was cleaner with the stretch. I am an expert in financial markets, but still have tons to learn and if you contest any point please share your thoughts in the comments.