Each year offers key lessons for investors to learn to help them be more successful in the future. 2011 did not fail us in that regard. Here are my top two takeaways from the year:
- Move Fast or Get Left Behind
Please tell me you noticed how much faster the market moves these days. Maybe it is all that high frequency trading and leveraged ETF’s doing the heavy lifting. Regardless the cause it seems here to stay.
So in the past you might have conjured up a new investment strategy but told yourself its best to let it marinate for a while before implementation. I keep finding that far too often that extra delay means I miss a big chunk of the move.
Best to trust your instincts and just get going or indeed you will be left behind.
- Complex Does Not Mean Unsolvable
For a while I was in the “Europe debt mess is unsolvable” camp. But then I realized that I was just falling victim to a far too common human behavior. That being that when a problem is so large and complex we make the easy (and false) assumption that…”if I can’t figure it out, then no one can“.
But let’s be honest with ourselves. How many of us are European political science majors? Or have done extensive work understanding the European economic system over the last 20 years since the Euro was formed?
The answer is that 99.9993% don’t have the proper background to analyze this situation. And unfortunately most of the experts we read on this subject are just faking it. Yes, there I said it!
There are very, very few people with the proper background in which to fully comprehend the European debt disaster. The rest of the investment writers just faked like they knew what they were talking about. And yes, I was as guilty as any of them.
That is why I wrote this article on December 1st to come clean on the subject and provide a different viewpoint on how the European situation may indeed get resolved.
(Note that since I wrote this article I have gotten a bit more bullish and am about 70% long the stock market just in time for this Santa Claus rally).
To sum it up, just because we don’t fully comprehend how a situation gets resolved doesn’t mean that it ends in disaster. So those still clinging to the European implosion scenario may find themselves on the wrong side of the market in 2012.
I am very interested to know what the rest of you think about these 2 lessons from 2011.
Also, please share what valuable lessons you learned this year that may help your fellow investors.
Reity
