Don’t Speculate, Preserve Capital, Be Patient

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Common Sense from Marc Faber

by Frank Holmes

Dr. Marc Faber, the economist, investor and long-time member of the prestigious Barron’s Roundtable, offers up some good perspective on investing in his latest Monthly Market Commentary newsletter.

The title of the commentary is “One of the First Duties of the Investment Advisor is Educating the Masses not to Speculate,” and it’s worth grabbing out a few of his key points.

I feel that most investors take far too many risks — often with borrowed money — and fail to diversify sufficiently. They also have little patience, very short-term time horizons and no tolerance for losses. Finally, their expectations about investment returns are completely unrealistic… Most investors buy a stock or make an investment with the view that within a month the return should be between 10% and 20%.

A real return of around 4% per annum is about what an investor (exclusive of costs, and without making the mistake to buy “high” and sell “low”) could expect to achieve over longer periods of time… If you can achieve an annual average real return of just 3% on all your assets (inflation adjusted), you will leave a huge fortune to your children.

Read the rest of the article

© 2010 Wall Street Pit

Dr. Marc Faber [send him mail] lives in Chiangmai, Thailand and is the author of Tomorrow’s Gold.

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