Friday, January 30, 2015

The Best Investments

I just read this in the Wall Street Journal,

The Best (and Worst) Investments They Ever Made: Luminaries in Finance and Other Fields Reveal Their Greatest Hits—and Biggest Misses .  

It was written about a month ago.  

They ask many famous investors and others what their best and worst investment ever were.  The common theme that runs through answers is that most bad investments were the result of over confidence in what may happen next.  The best investments tend to involve patience, prudence, and humility, you know, the boring stuff.

Here are two of my favorite sets of answers from the article, mostly because they are short and to the point:

William Bernstein, neurologist and investment manager at money-management firm Efficient Frontier Advisors:

The worst investment I ever made was about 30 years ago when I learned the hard way—by trading platinum—why individual investors shouldn’t dabble in commodity futures. The price collapsed and I lost something in the low five figures. I applied the lesson to speculation in general, and it’s been paying dividends ever since.

The best, back around 1994, was shares in [Mexican telecommunications giant] Telmex, a combination of astuteness and dumb luck. It was dirt-cheap, around five times earnings, and I made something like 20 times my money on the stock and its spinoffs. I later realized that a much safer and smarter move would have been to buy an emerging-markets index fund. Telmex could easily have gone bankrupt, but not a dozen or two whole markets.

Eugene Fama, Nobel laureate in economics (2013) and finance professor at the University of Chicago:

Best: a 50-year policy of never investing with active managers.

Worst: $15,000 lost in a 1960s investment in a private oil-exploration company.

The shale revolution might have saved them, but they were gone by then.