Be Completely Honest About Your Investing Weakness

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Warren Buffett once said, “I’ve never swung at a ball while it’s still in the pitcher’s glove.” Incidentally, that perfectly describes the category of investing mistakes that I am prone to make—I am likely to be predict something way before it actually happens. I am much better at predicting what will happen than I am at predicting when it will happen.

For instance, at the end of 2011, I began writing Seeking Alpha articles mentioning that interest rates are likely to increase soon because the economy is improving. Well, one year and a half later, and we’re only now just starting to realistically consider the possibility that rates will be going up. The good news is that I have not been harmed in any way by this call—I spend my time focusing on finding excellent companies to buy at decent prices, and then letting the dividends roll in from there. When you spend your life stuffing your personal balance sheet with ownership stakes in Coca-Cola, Johnson & Johnson, Colgate-Palmolive, Exxon Mobil, and others, it is hard to screw life up from an investing perspective if you let the dividends pile up and hold those companies for the long haul as part of a diversified portfolio of stocks.

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An Important Investing Lesson From Benjamin Graham

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I was recently going over some of Benjamin Graham’s old lectures at Columbia University when I came upon one gem of wisdom that I wanted to share with you. In my paraphrase, Graham said this: Achieving satisfactory results with stock market investing is much easier than people think. Beating the S&P 500 on a reliable basis is much harder than people think.

The funny thing about investing is that we will never know how we did because it is a lifelong pursuit. Sure, if you have been investing for twenty years you can get an idea of how you have performed in relation to the S&P 500 index overall, but that tells you little about how you will be doing going forward. After all, if you have beaten the S&P 500 for the past twenty years, there is no guarantee that you will continue to do so over the next twenty. And if you trailed the S&P 500 for the past twenty years, it is possible that you may have learned from your mistakes and will perform better over the next twenty.

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