There is so Much Financial Advice out There — So Which is the Best?

Over a decade of searching has taught me one thing

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The advice that’s never given, actually.

The advice that you’re given to achieve financial independence and wealth are as follows:

  • Diversify.
  • Buy things that are perceived as low-risk.
  • Buy real estate.
  • Get a CD.
  • Get a savings account.
  • Invest in mainstream companies.
  • Follow Ameritrade/Fidelity/replace brokerage or investment service here.
  • Get a financial advisor.

The list goes on.

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Mortgage debt total outstanding and U.S. homeowner’s equity tracker. Source: FRED.

Above is the data for homeowner’s equity along with the outstanding mortgage debt in the United States. Both are at record highs, but, more importantly, homeowner equity completely vanished between 2009–2011. About $8 trillion or so in homeowner equity disappeared with immediacy. When we talk about the safety of investments and volatility, for some reason that never flows into the conversation.

Getting comfortable with divergence.

It took me about 5 years to get comfortable with the stock market. I was also far too young when it started to interest me and I had no money. When I was 20, I bought one company that I fully understand and another company that I thought was financially beaten up for bad reasons.

The one group that fascinated me at 15 were the guys at Renaissance Tech who managed to make over $100 billion in gains over a span of 30 years, generating about 70% annualized gains.

That made me think that the stock market was

  • imperfect and not efficient.
  • slow to react to things.
  • inflexible due to so-called professionals who speak non-sense about companies (Looking at any analyst that was negative on AMD 2011–2016 and negative on Netflix 2011–2015). Jim Cramer is in that bunch.
  • slow, then fast — meaning that investors will drop a company all of a sudden really fast, then leave it like that for a long time, then pump it up really fast all over again.
  • not impossible to figure out.

And those things ended up being true almost a decade later. I think the best advice is not publicly available. If you are starting out with hundreds of thousands of dollars, or even millions of dollars, then you can follow advice to bring you 10% per year and you’ll be fine for the rest of your life.

Winning can’t occur without losing on the other side.

If you want to make real value in the stock market, then it will take knowing something that others don’t.

That’s exactly why Renaissance Tech is completely secret.

If anybody and everybody could make a wise investment, then there would be nobody left to be on the other side of the transaction. At the end of the day, the best investment advice involves going big on something that others haven’t realized the value of yet.

Written by

UC Berkeley, mathematics. Los Angeles. Long-time runner. Top writer on Quora, 100M+ total content views. New to Medium. Inquiries: Moumj@berkeley.edu

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