Have Reasonable Expectations


The stock market’s performance depends on three factors

  1. Real growth (the rise of companies’ earnings and dividends)

  2. Inflationary growth (the general rise in prices throughout the economy)

  3. Speculative growth/decline (any increase or decrease in the investing public’s appetite for stocks)

Above-average investment skill and a lot of good luck can help you earn around 20%.

In a world where interest rates are 10% if you can find long-term opportunities that will give you 18% you should be more than satisfied. That’s how I look at it. If someone else finds a 25% opportunity and I don’t invest in it, it doesn’t bother me.

Being envious is a bad idea in investing and in life. That’s a big lesson for every student of Charlie Munger.

If you want happiness in investing and in life, having an adjustable aspirational level is important.

Voltaire said - The perfect is the enemy of the good.

Perfection in investing is generally unobtainable, and the best one can hope for is to make a lot of good investments – that are expected to make reasonable long-term returns – and exclude the bad ones.

Ben Franklin said – Blessed is he that expects nothing, for he shall never be disappointed.

Jason Zweig in The Intelligent Investor,

"The only thing you can be confident of while forecasting future stock returns is that you will probably turn out to be wrong. The only indisputable truth that the past teaches us is that the future will always surprise us — always!...

So, by all means, you should lower your expectations.”

Munger says –

"It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent. There must be some wisdom in the old saying: ‘It’s the strong swimmers who drown.’"

Read more: http://www.safalniveshak.com/reasonable-expectations/


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