Trend Following, 5th Edition

Preface

Men wanted for hazardous journey. Small wages. Bitter cold. Long months of complete darkness. Constant danger. Safe return doubtful. Honor and recognition in case of success.¹

Want to take the financial journey to a new investing philosophy that might very well affect the rest of your moneymaking life? I can’t guarantee the yellow brick road, but I can promise the red pill will leave you wide awake.

Nearly every time I strayed from the herd, I’ve made a lot of money. Wandering away from the action is the way to find the new action.

Jim Rogers

In late 2016 The Wall Street Journal reported that Steve Edmundson, the investment chief for the Nevada Public Employees’ Retirement System, has no coworkers, rarely takes meetings, and eats leftovers at his desk. His daily trading strategy: Do as little as possible, usually nothing. The Nevada system’s $35 billion in stocks and bonds are all in low-cost funds that mimic indexes. He may make one change to the portfolio a year.²

Not exactly a life changing revelation, I know, but that do-nothing, sit-on-your-hands investing premise doesn’t stop with one-man shows. Dimensional Fund Advisors LP (DFA), the sixth-largest mutual fund manager, is drawing in nearly $2 billion in net assets per month at a time when investors are fleeing other firms. DFA is built on the bedrock belief that active management practiced by traditional stock pickers is futile, if not an absurdity. DFA’s founders are pioneers of index funds.³

Now we are getting ...