The Little Book of Market Myths PDF (How to Profit by Avoiding the Investing Mistakes Everyone Else Makes) This book covers some of the most widely believed market and economic myths—ones that routinely cause folks to see the world wrongly, leading to investing errors.
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Author: Ken Fisher
Free Download link: At the end of the post
Exposes the truth about common investing myths and misconceptions and shows you how the truth shall set you free―to reap greater long-term and short-term gains
Everybody knows that a strong dollar equals a strong economy, bonds are safer than stocks, gold is a safe investment and that high PEs signal high risk…right? While such “common-sense” rules of thumb may work for a time as investment strategies, as New York Times and Wall Street Journal bestselling author, Ken Fisher, vividly demonstrates in this wise, informative, wholly entertaining new book, they’ll always let you down in the long run. Ken exposes some of the most common―and deadly―myths investors swear by, and he demonstrates why the rules-of-thumb approach to investing may be robbing you of the kinds returns you hope for.
- Dubbed by Investment Advisor magazine one of the 30 most influential individuals of the last three decades, Fisher is Chairman, and CEO of a global money management firm with over $32 billion under management
- Fisher’s Forbes column, “Portfolio Strategy,” has been an extremely popular fixture in Forbes for more than a quarter century thanks to his many high-profile calls
- Brings together the best “bunks” by Wall Street’s Master Debunker in a fun, easy-to-digest, bite-size format
- More than just a list of myths, Fisher meticulously explains of why each commonly held belief or strategy is dead wrong and how damaging it can be to your financial health
- Armed with this book, investors can immediately identify major errors they may be committing and adjust their strategies for greater investing success
Questioning yourself is hard.
One of the hardest things we do (or rather, don’t do). Folks don’t like questioning themselves. If we question, we might discover we’re wrong, causing humiliation and pain. Humans evolved over many millennia to take any number of extraordinary and often irrational steps to avoid even the risk of humiliation and pain.
Those instincts likely helped our long-distant ancestors avoid being mauled by wild beasts and starving through long winters. But these deeply imprinted instincts often are exactly wrong when it comes to more modern problems like frequently counterintuitive capital markets. I often say investing success is two-thirds avoiding mistakes, one-third doing something right. If you can just avoid mistakes, you can lower your error rate. That alone should improve your results. If you can avoid mistakes and do something right on occasion, you likely do better than most everyone. Better
than most professionals!
Maybe you think avoiding mistakes is easy. Just don’t make mistakes! Who sets out to make them, anyway? But investors don’t make mistakes because they know they’re mistakes. They make them because they think they’re making smart decisions. Decisions they’ve made plenty of times and have seen other smart people make. They think they’re the right decisions because they don’t question.
After all, what sense does it make to question something that “everyone knows”? Or something that’s common sense? Or something you learned from someone supposedly smarter than you?
Waste of time, right?
No! You should always question everything you think you know. Not once, but every time you make an investing decision. It’s not hard. Well, functionally it’s not hard, though emotionally and instinctually, it might be. What’s the worst that can happen? You discover you were right all along, which is fun. No harm done.
Or . . . you discover you were wrong. And not just you, but the vast swaths of humanity who believe a false truth—just as you did! You’ve uncovered a mythology. And discovering something you previously thought to be true is actually myth saves you from making a potentially costly mistake (or making it again). That’s not humiliating, that’s beautiful. And potentially profitable.
The good news is, once you start questioning, it gets easier. You may think it impossible to do. After all, if it were easy, wouldn’t everyone do it? (Answer: No. Most people prefer the easy route of never questioning and never being humiliated.) But you can question anything and everything—and should. Start with those things you read in the paper or hear on TV and nod along with. If you’re nodding, you’ve found a truth you’ve probably never investigated much, if at all.
Like the near-universal belief high unemployment is economically bad and a stock market killer. I know of no one who says the reverse—that high unemployment doesn’t cause future economic doom. Yet, as I show in Chapter 12, unemployment is provably a late, lagging indicator and not indicative of future economic or market direction. And amazingly, recessions start when unemployment is at or near cyclical lows, not the reverse. The data prove that, and fundamentally it makes sense, once you start thinking how a CEO would (as I explain in the book). This is a myth I disprove using pretty easy-to-get data from public sources. Data that’s universally available and easy to compile! But few question this myth, so it endures.
This book covers some of the most widely believed market and economic myths—ones that routinely cause folks to see the world wrongly, leading to investing errors. Like America has “too much” debt, age should dictate asset allocation, high dividend stocks can produce reliable retirement income, stoplosses actually stop losses and more. Many I’ve written about before in various books, but here I collect what I view as the most egregious myths and expand on them or use a different angle or updated data.
Then, too, I’ve written about many of these myths before simply because they are so widely and rigidly and wrongly believed. My guess is writing about them here again won’t convince many (or even most) the mythology is wrong. They’ll prefer the easy route and the mythology. And that’s ok. Because you may prefer the truth—which gives you an edge—a way to avoid making investment decisions based not on sound analysis and/or fundamental theory, but on a myth everyone believes just because.
Each chapter in the book is dedicated to one myth. Jump around! Read them all or just those that interest you. Either way, I hope the book helps you improve your investing results by helping you see the world a bit clearer. And I hope the examples included here inspire you to do some sleuthing on your own so you can uncover still more market mythology.
You’ll quickly see a few common characteristics throughout the chapters. A how-to manual to myth debunking, if you will. The tactics I use over and over to debunk these myths include:
Just asking if something is true. The first, most basic step. If you can’t do this, you can’t move to later steps. Being counterintuitive. If “everyone knows” something, ask if the reverse might be true.
Checking history. Maybe everyone says XYZ just happened, and that’s bad. Or it would be so much better if ABC happened. Maybe that’s true, maybe not. You can check history to see if XYZ reliably led to bad or ABC to good.
Ample free historical data exist for you to do this!
Running some simple correlations. If everyone believes X causes Y, you can check if it always does, sometimes does or never does.
Scaling. If some number seems impossibly scary and large, put it in proper context. It may bring that fear down to size.
Thinking globally. Folks often presume the US is an island. It’s not—the US is heavily impacted by what happens outside its borders. And investors the world over tend to have similar fears, motivations, etc.
There are plenty of myths investors fall prey to—I couldn’t possibly cover them all here. But if you can get in your bones the beauty and power of questioning, over time, you should be fooled less by harmful myth and get better long-term results. So here we go.
Table of Contents- The Little Book of Market Myths PDF
Chapter One: Bonds Are Safer Than Stocks
Bonds Are Volatile, Too
Stocks Are Less Volatile Than Bonds?
Stocks Are Positive Much More Often Than Not
Stocks Are Positive—And Overwhelmingly Beat Bonds
The Stock Evolution
Chapter Two: Asset Allocation Short-Cuts
The Critical Asset Allocation Decision
Getting Time Horizon Right
Inflation’s Insidious Impact
Chapter Three: Volatility and Only Volatility
Oft-Overlooked Interest Rate Risk
Portfolio Risk and Food Risk
When Opportunity Doesn’t Knock
Chapter Four: More Volatile Than Ever
Volatility Goes Up, Too
Volatility Isn’t Predictive
Volatility Is Volatile—And Not Trending Higher
Hug a Speculator
Chapter Five: The Holy Grail—Capital Preservation and Growth
Capital Preservation Requires No Volatility . . .. . . But Growth Requires Volatility!
Chapter Six: The GDP–Stock Mismatch Crash
GDP Measures Output, Not Economic Health
Shrinking Government Spending Is Good, Not Bad
Too Far, Too Fast?
What Are Stocks?
Chapter Seven: 10% Forever!
Stock Returns Are Superior—And Variable
I See 5% CDs
Chapter Eight: High Dividends for Sure Income
Chapter Nine: The Perma-Superiority of Small-Cap Value
Perma-Love or Heat Chasing?
Chapter Ten: Wait Until You’re Sure
TGH at Work
Chapter Eleven: Stop-Losses Stop Losses
The Stop-Loss Mechanics
Stock Prices Aren’t Serially Correlated
Pick a Level, Any Level
Chapter Twelve: High Unemployment Kills Stocks
See It Like a CEO
The Economy Leads, Unemployment Lags
The Stock Market Really Leads
Consumer Spending Is Incredibly Stable
Producers in the Driver’s Seat
Chapter Thirteen: Over-Indebted America
The Government Is a Stupid Spender
Putting Debt in Perspective
The Real Issue . . . Affordability
Cheaper Debt After the Downgrade
Dependent on the Kindness of Strangers?
Nowhere to Go
Chapter Fourteen: Strong Dollar, Strong Stocks
Weak Dollar, Strong Dollar—Does It Matter?
Think Inside the 4-Box
Chapter Fifteen: Turmoil Troubles Stocks
Chapter Sixteen: News You Can Use
Look the Other Way
A Sentiment Indicator
Interpret It to Use It
Ground Rules for Interpreting Media Profitably
Chapter Seventeen: Too Good to Be True
Separate Decision Maker and Custody
High and Steady . . . and Fake
Super-High . . . and Also Fake
Scams of All Stripes
About the Authors
Reviews- The Little Book of Market Myths PDF
“By demolishing so many wealth-destroying myths, Ken Fisher has performed a priceless service for investors at a time when they need all the help they can get.”
―Steve Forbes, Chairman and Editor-in-Chief, Forbes Media
Learn the truth about common investing myths and the truth shall set you free
Have you ever asked if what you believe to be true actually is? If not, why not? A huge amount of what most investors believe is actually wholly or partially untrue―utter market myth leading to, at times, costly errors.
But investors don’t follow myths because they know they’re wrong. They follow myths because they seem like smart, common sense, “everyone knows” market wisdom. How can you tell the difference between myth and reality?
By questioning. And in The Little Book of Market Myths, CEO and bestselling author Ken Fisher questions everything. From the belief that bonds are always safer than stocks to the idea that America’s big debt must spell economic doom. He stamps out rules of thumb and overturns decades of widely accepted but ultimately misguided market wisdom.
In doing so, he shows readers how they, too, can question everything and see the world more clearly. And by seeing the world more clearly, they can begin seeing better investing results.
Read The Little Book of Market Myths yourself and start investing based on reality, not “everyone knows” mythology.
About the author
Ken Fisher is best known for his prestigious “Portfolio Strategy” column in Forbes magazine, where his over-28-year tenure of high-profile calls makes him the fourth-longest-running columnist in Forbes’s 90- plus-year history. He is the founder, Chairman and CEO of Fisher Investments, an independent global money management firm managing tens of billions for individuals and institutions globally. Fisher is ranked #271 on the 2012 Forbes 400 list of richest Americans and #764 on the 2012 Forbes Global Billionaire list.
In 2010, Investment Advisor magazine named him among the 30 most influential individuals of the last three decades. Fisher has authored numerous professional and scholarly articles, including the award-winning “Cognitive Biases in Market Forecasting.” He has also published nine previous books, including the national bestsellers, The Only Three Questions That Count, The Ten Roads to Riches, How to Smell a Rat, Debunkery and Markets Never Forget, all of which are published by Wiley. Fisher has been published, interviewed and/or written about in many major American, British and German finance or business periodicals. He has a weekly column in Focus Money, Germany’s leading weekly finance and business magazine.
Lara Hoffmans is Vice President of Content at Fisher Investments, managing editor of MarketMinder.com, a regular contributor to Forbes.com and coauthor of the bestsellers, The Only Three Questions That Count, The Ten Roads to Riches, How to Smell a Rat, Debunkery and Markets Never Forget. A graduate of the University of Notre Dame, she currently lives in Camas, Washington.
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