Top 7 Investment Concepts by Samuel A. Kiburz:
1. Investments always return to the mean. Deciding where the mean is can be the hard part.
2. On a long enough timeline, all investments have the same return. That timeline, however, may be longer than your life span.
3. The price of an investment is only important on the day you buy it and the day you sell it. The price in between is meaningless.
4. Memories are long when times are good and short when times are bad.
5. Donald Rumsfeld's famous quote, "It's not the known knowns, or the known unknowns, it’s the unknown unknowns that worry me" reminds us that these unknown unknowns are where true investment risks lie.
6. Returns come from one of two ways:
- The receipt of cash in the form of dividends/interest.
- The sale of that investment to someone else.
7. Investments can be put on a probability curve where there is a direct relationship between risk and return. Combining both and knowing how they look is the most important determinant if an investment is appropriate for a client. This concept is today’s Chart of the Day.