Chapter 14Putting It All Together

Jacobian Inverse: In order to limit my chances of investing success, I will do the following: have no strategy, let the present day be my guide, make emotional decisions, seek confirming data, eschew discipline, follow the crowd, invest in companies reaching new highs, and definitely take an “expert’s” word for what to do about the future.

There are around 2,800 companies listed on the New York Stock Exchange and roughly 5,000 companies on the Nasdaq. At any given time, some will be up and some will be down. Some of the stocks will be hotter than the core of the sun, and some will be devalued to the point that they are gasping for their last breaths. Wading through all the data and trying to predict the future of any given stock is a fool’s errand. No one—I mean no one—can predict the future. But that doesn’t mean you need to settle for the same old, same old when it comes to investing your money.

Most investors clamor to mutual funds or index funds because of fear of the perceived unknown, because there is safety in numbers—it feels comfortable, and the investment involves a high degree of cognitive ease. It’s completely understandable, particularly when the alternative seems to be going rogue, flying by the seat of your pants and trying to keep up with the day traders. But if there’s one thing you should take away from this book, it is this: there is another way. A way to make smart investments based on solid principles that reduce risk while ...

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