The Little Book of Market Myths By Ken Fisher




I read The Little Book of Market Myths by Ken Fisher and found it really interesting as it takes a very alternative view on investing and is written by a very professional investor – I will pass on the following main points from the book to my kids

  • Bonds are not safer than stocks if you take a long term view
  • To challenge markets myths; ask if something is true, be counterintuitive, check history, run some simple correlations and think globally
  • 70% of your portfolio returns come from assets allocation – mix of stocks/bonds/cash/other and you need to factor in inflation as it impacts your purchasing power
  • Volatility is not a predictor of return eg if a stock is volatile measured by standard deviation – this does not mean that returns will be bad
  • Stay in the market for the long term
  • It is not good to rely only on high dividend stocks as dividend policy might change thereby reducing your income – also look at long term asset allocation
  • Watch out in using a stop loss as stocks are not serially correlated(past price movements do not predict future price movements) – say you pick a stop loss of say 20%  and you sell – the stock could again move up

The was more to the book that related to USA issues which were not relevant to global issues