10 Inconvenient Truths About Investing & The Markets

This morning, as I was catching up on my reading, I stumbled onto this gem from Business Insider of an interview with the founder of Robinhood, a mobile app to let individuals trade stocks with no commissions.

今朝のことだが、私は面白い記事を見つけた、Buisiness Insideに掲載されたRobinhood創業者のものだ、個人投資家が手数料無料で株式売買できる携帯アプリを提供している。

“It’s [Robinhood Gold] serving a need that we saw in a part of our core user base, which includes people using Robinhood for the first time as well as those who have been with us since the beginning. A really large percentage of those users have become more mature investors. The No. 1 thing they kept asking for was the ability to use a margin feature.

「Robinhood Goldサービスは我々のコアユーザを対象としたものだ、創業以来の利用者のみならず初めてRobinhoodを利用するひとにも提供する。利用者のかなりの数は投資経験が十分にある。そういう人たちが最初に問い合わせるのは証拠金取引の有無だ。」

With margin debt levels at already record high levels, the demand by individuals to leverage themselves into the financial markets has always, without exception, ended extremely poorly. Since the vast majority of users of the Robinhood app have never seen a bear market, the real lessons of trading have yet to be learned.

現在、証拠金取引残高は過去最高レベルにあり、個人投資家が自己資金をレバレッジする需要はいつものことだが、例外なく、悲惨な結末で終わる。Robinhood アプリの利用者の圧倒的多数はこれまでベア相場を経験したことがまったくないため、彼らは本当の取引を学ぶ必要がある。

It also brings me to today’s post.


One of the first rules that any successful long-term trader or investor will tell you is to keep a written record of your activities. This provides the basis for you to learn what you are doing right, but more importantly what you are doing wrong. The secret to investment success is actually quite simple and can be summed up as follows:


“Do more of what works and less of what doesn’t.” – Dennis Gartman

「有効な行動を増やし、無効な行動を減らすことだ。」ーーDennis Gartman

As I was reviewing some old trading notebooks this past weekend, a folder sheet of paper fell out of one of my 2011 binders. It was a printout of the “20-Truths Of Investing And The Markets” by Ivan Hoff of Ivan Hoff Capital.

私自身が昔のトレード帳を先週見直した、そこに2011年の書類があった。Ivan Hoff Capital のIvan Hollが書いた「投資と市場に関する20の真実」という記事を印刷したものだった。

I wanted to share my 10-favorites with you by adding some illustrations as well.


1. Stock prices run in cycles. Periods of re-pricing are usually quick and powerful.


Read: Soros – A Rudimentary Theory Of Bubbles


2. Stocks are very highly correlated during drastic sell offs and during the initial stage of the recovery. In general, correlation is high during bear markets.


Read: I Bought It For The Dividend


3. Try to trade in the direction of the trend. It is not only the path of least resistance, but also provides the best profit opportunities. Have a simple method to define the direction of the trend.


Read: Managing A Trend Change


4. Being wrong is not a choice. Staying wrong is.


Read: You Can’t Time The Market?


5. The overall market conditions will never be perfect and when they seem so it is probably a good idea to decrease exposure and take profits. With that in mind, you don’t have to be in the market all the time. When you don’t see good setups, it just makes sense to watch from the sidelines.


Read: 7-Myths Of Investing


6. If you understand the incentives of the major market participants, you will be able to predict their likely behavior. Technical analysis is a lot about understanding incentives and recognizing intentions.


Read: 7-Trading Rules You Won’t Follow


7. Your first loss will often be your best loss. No one is right all the time and you don’t have to be. There are market participants that are immensely profitable by being right only 30% of the time. It is good to have conviction in your investment thesis, but discipline should always trump conviction.


Read: The Psychology Of Loss


8. Optimism and pessimism in the stock market are contagious. Investor psychology often loses its logic and become emotional. The news media and the most recent price action play a particularly important role in developing moods of mass optimism or pessimism.


Read: 5-Universal Laws Of Human (Investment) Stupidity


9. Rising P/E is an indicator of rising expectations and confidence in the future of the stock. The P/E ratio reflects the enthusiastic optimism, or the gloomy pessimism of investors.


Read: Valuation Measures And Forward Returns


10. It doesn’t matter how smart you are, how ingenious your idea is or how cheap your stock is – if the market does not agree with you, you will not get paid. Period.


Read: The Big Lie Of Market Indexes


These are just reminders to keep you grounded in the reality of how money, and investing, REALLY work over the long-term. While it is easy to get lost in the excitement of the moment, the brutal return to reality has always been a costly lesson to re-learn.