Barry’s Rules

Barry Ritholtz had a nice piece in the Washington Post detailing his 12 rules of investing.   It’s a nice addition to our list here.

1. Cut your losers short, and let your winners run.

2. Avoid predictions and forecasts

3. Understand crowd behavior.

4. Think like a contrarian.

5. Asset allocation is crucial.

6. Decide if you are an active or passive investor.

7. Understand your own psychological make up.

8. Admit when you are wrong.

9. Understand the cycles of the financial world.

10. Be intellectually curious.

11. Reduce investing friction.

12. There is no free lunch.

 

 

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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Comments

  1. Ritholtz’s is an informative Blog but one does have to stomach liberal bias in link choices and even worse liberal Obama-loving vitriol from commenters.

  2. I stopped visiting that website when he wrote a ridiculous article against Sarah Palin re: the Arizona shooting (essentially trying to tie a map on her website w/ “targets” (a very common thing) with somehow causing the shooting! A blood libel that was totally debunked within 24 hours of the shooting). Worse, he edited and deleted some of my comments because he knew he was wrong and I exposed his empty argument as being just that. I have no respect for someone who can’t handle people disagreeing (respectfully, of course) with them. I believe the man is a bit of a fraud, i.e. more interested in self-promotion than truth.

  3. p.s. Axioms like “Cut your losers short, and let your winners run.” sound wonderful, but are worth nada. The problem is, we never know until after the fact whether we have a winner or a loser. Unless one is to only hold trades that go immediately and only in the direction of a “win”, which is statistically highly unlikely and thus has no positive expectation. You could have bought AAPL at $100, saw it go down, and “cut your loser short”. Obviously, that wouldn’t have been a good decision. I think a better rule is “never allow yourself to lose more than x% on any one trade”. That takes into account that you don’t know which trades will win or lose, and regardless you apply risk management with discipline.

    I think 7 and 8 are the only worthwhile items on that list. The “inner game” is the best place to focus.