What Is the Greatest Investing Lesson from the Past Five Years?

I liked this poll from CFA Institute asking what the most important lesson from the past 5 years was.  The answers aren’t terribly surprising I guess:

59.16% – Central banks and govts will continue to bailout troubled creditors.

23.72% – Equity market structures having negative effects on market trust.

9.51% – Institutional creditors will be more prudent in lending.

3.8% – Systematically important financial institutions’ boards are working to manage risks arising from the companies’ complexity.

3.8% – Financial regulations will prevent systemic failures in the future.

Not sure I totally agree with all those, but it’s a great question.  What’s the greatest investing lesson from the past 5 years?  What a learning period it’s been.  If you had the good fortune of surviving this period in one piece you’ve no doubt accumulated a wealth of knowledge – assuming you weren’t asleep throughout it all.  What’s your greatest investing lesson of the last 5 years?



Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.

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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  1. If I knew then, what I know now… I would have gone “all in” 100% into small cap equities as soon as Bernanke announced QE1.

  2. That being at least a passible trader is vital in these complex and highly tweaked economies. It’s scary how quickly it all shifts. My time horizon keeps getting shorter.

  3. Buy and hold. Still works.
    Market timing would work better, if I thought I could do it.

  4. 1. Central banks can do a pretty good job fighting deflation, but can’t seem to figure out how to create inflation.

    2. Listening to perma bears can be very expensive.

    3. No guts, no glory!

    I somehow managed to more than double my money over the past five years.

    Now I need to figure out if I’m good or just lucky…..

  5. To listen to my elders: ie. Bogle, Buffett.

    Clearly, other than that I know nothing.

  6. for me it was to learn a bit about how money works, MMT and MR and why QE will not end up in out of control inflation.

  7. Being able to distinguish the difference between a real approaching train wreck (2008 crisis) and a false alarm that central banks will “manage” (2011 European sov debt crisis) can make you a successful investor. Because I read and paid heed to calculated risk and naked capitalism websites in early 2008, I fortunately did not get hurt much in 2008. But I hurt myself in 2011 by battening down the hatches for another crisis starting in the Eurozone. I missed the big rally starting early Oct 2011. It is not easy to tell the difference between a real crisis and just a scare.

  8. 1. Read Pragmatic Capitalism daily
    2. Subscribe to Orcam investment research
    3. Have a discussion with the ever gracious Cullen
    4. Invest according to 2 and 3 above
    5. Sleep well at night :-)

  9. 1. It pays to be an optimist.
    2. Rich white people will do whatever it takes to preserve the status quo.

  10. I hope you’re right! I’ve been at it for 25 years now, and this was the best 5 year period ever. Now if I can pull off another 5 similar years, it will be early retirement for me!

    And I have to thank Cullen for some of that! It was around 5 years ago when I made the transition from dyed in the wool Austrian thinking, to MMT, and now to MR. If I had expected raging inflation the way some my old buddies did (and some still do), my investment choices would have been very different.

  11. Buy stock in large companies that produce goods, that are growing earnings, that pay dividends, that increase those dividends, and that have a history of increasing both earnings and dividends in the past 25 years, and then don’t pay too much for them when you buy them.

    If you do this, you don’t need to worry unless a Mad Max type event happens. If that happens, find a dog, a gyro-pilot and a “gazzoline” refinery.

  12. Sadly, it’s that our political system is broken and that the big banks are above the law of the land. Neither of those two things had been as explicit before. But, i think it is worth pointing out that the last 5 years have been a lot less dramatic on a chart than they have been in front of a television screen…

  13. oops, the investment lesson bit didn’t quite register. To my mind, the biggest lesson from the last 5 years is that several big things find their origin in currency markets. A more general lesson would be to rid yourself of political ideology and bogus biases and be guided by the data.

  14. +1. Yes, rid yourself of political ideology and bogus biases, like the bias that says QE and the huge increases in the Fed’s balance sheet must lead to hyperinflation. That is bogus and Cullen has shown why. The inflationistas have been wrong. The deflationists have also been off (although not quite as much). Those following a middle, non-ideological, tempered optiimistic course have done well.

  15. Some would say that “Those following a middle, non-ideological, tempered optimistic course have done well” because *obviously* they’re IN ON the conspiracy, can’t be trusted, and are the enemies of FREEDOM!!!


  16. #1 – don’t lose money.
    #2 – if its too good to be true, it isn’t. so remind yourself of #1
    #3 – as soon as you realize you missed a big opportunity, and if only you had known before – IT IS TOO LATE. Don’t be the last fool. See #1
    #4 – as soon as you realize things are going down the tubes – GET OUT. Don’t wait. See #1

    As you can tell all I’ve learned is how not to lose money – largely from losing money before finding pragcap. What I have yet to learn is how to make money investing (um, I mean saving) but I’m making baby steps lately.

  17. Nothing new actually.

    * History is littered with failed investors who thought they would do a better top down global macro strategy than the average investor.

    * Buy great companies when people use macro analysis to be bearish on great companies.

    * Things are never as bad as you feel; Things are never as great as you feel.

    * Mr. Market is sometimes irrationally paranoid and sometimes irrationally bullish.

    * It’s easy to fool people with a shiny metal.

    * Most advisers make money on selling newsletter, subscriptions or sales commission (from your local gold peddler to goldman sachs)

  18. Forgot one more…

    * Real Analysis (Nate Silver, Calculated Risk, Prag cap) always trumps ideology-driven analysis (George Will, Dick Morris, ZeroHedge, Peter Schiff, Mish)