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The best solutions spring from process not product.
The omnipresent conflict of interest endemic to the financial services industry revolves about compensation; broker compensation is largely driven by product solutions. Process solutions require sophisticated expertise, labor intensive consultative collaboration, and assume fiduciary responsibility. |
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The stock market represents an opportunity to purchase fractional ownership interests in businesses. The better the business, purchased at a correct price, the greater the opportunity.
Most investors transform the stock market into an electronic casino – and, over time, experience a gambler's result. |
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What everyone knows about investing is usually worth little.
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Greater risk does not produce greater returns.
Greater risk increases the probability of loss. |
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Intelligent investors seek absolute returns.
Gamblers seek relative returns. |
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Achieving average investment performance is easy; above average is exceedingly difficult. |
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Modern Portfolio Theory (MPT) and the Efficient Market Hypothesis (EMH) are nonsensical academic notions.
If the stock market was truly efficient, security prices would smoothly adjust to reflect changes in enterprise value; volatility would be virtually non-existent. |
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Broad diversification is a proxy for ignorance.
Broadly diversified portfolios acknowledge ignorance by saying, in effect, “Because I really do not know, I will spread my risk as much as possible.” Broadly diversified portfolios are the refuge of amateurs. |
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Asset Allocation is a first cousin to the misguided notion of Broad Diversification. |
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Exceptional investment performance springs from concentrated portfolios.
Diluting one's best investment ideas with inferior investment ideas makes no sense. Client portfolios typically hold between 20 and 40 securities. |
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To perform better than average you cannot do what everyone else is doing.
Insanity may be defined as repeating the same activity but expecting a different result. |
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Buying early (i.e. investing before the crowd) and being wrong look identical. |
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Selling early (i.e. before the crowd) and being wrong look identical. |
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The most successful investors appear to be wrong most of the time. |
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Risk is not necessarily correlated to return.
Simply stated: the cheaper you buy the less the risk, and the cheaper you buy the greater the return. |
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The return of your principal is more important than the return on your principal. |
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Investment safety is mostly a function of the balance sheet. |
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Educated investors make better clients.
Commentary, a monthly publication personally written by Marshall Serwitz, is intended to educate and inform. Selected past editions, further articulating our biases, are provided under Library Tab. |
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“Compounding is the greatest mathematical discovery of all time” Albert Einstein |
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