I’ve said it a bunch of times here. It’s not an “SAFTM original” (not much is…). But it’s great advice. And it’s the best advice Thomas Atteberry, Manager, FPA New Income, and Morningstar’s co-bond manager of the year in 2008, could give you about money. It’s so true. Investing and managing money does not have to be complicated to be successful. Let’s dig in. From the article:
Best advice I can give: Be patient. You don’t have to be the first person to come into a promising investment.
Best advice I ever got: I got this from a bunch of places, including my dad and Peter Lynch: Don’t invest in anything you don’t understand. As an investor, stick with simple businesses and simple business models.
People really need to get back to owning 15 or 20 companies that they understand, rather than 50 stocks that they don’t.
My take:
I disagree that people “need” to own individual companies at all. But his point is that if you do, stick with a manageable number of companies you can handle. You can do homework on 15 or 20 companies (if that’s what you’re interested in) and own a well-diversified portfolio of companies. But yeah, if individual company investing is for you, he’s got some great advice.
The advice he gives cuts many ways though.
You definitely don’t need to be the first person to come into a promising investment (but you also probably don’t want to be the last one out)! So yeah, be patient. Give yourself enough time to do some homework. This applies to all investments, not just stocks.
Don’t be frozen in the name of “patience” though. If you find an investment that interests you, do the homework and make a decision. You don’t want to be the last one in either (Any 2007 property flippers want to weigh in here?). There comes a point where it’s too late and people are no longer investing on information – instead they’re investing on hype. If you find yourself the last one into an investment, the party may be over and you may be left cleaning up the mess.
But over the looooooong term, patience will pay. Real Estate prices will probably be higher 20 years from now than they were five years ago. So if you bought in at the height of the market, panicking and selling out may come back to haunt you.
Bottom line:
Have you ever heard that being “patient” is the wrong thing to do? I haven’t. So, yeah, Mr. Atteberry gives us some good advice. Combine the headline advice with his best advice and the best advice he got and you have some great advice. Stick with what you know. Be patient. And if you want to own individual stocks, you don’t need to own 50 of them to do well! (The same advice can be given with ETFs, too. Imagine owning 50 ETFs! Talk about overcomplicating an investment strategy that’s designed to simplify your portfolio!)
Until next time, put your credit card down and slowly step away from the mall!
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