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I need to make, on average, smaller and more frequent investments, that's for sure.


BINGO! We have a winner.

'Frequency' is something I'm worrying now about (due to just having read Taleb's latest book). Unless/until an investor/trader is doing significant turnover, he/she can't conclude results aren't mainly due to randomness. Also and additionally, there's the huge problem of trying to explain why the so-called 'average investor' preforms so poorly. Dalbar's numbers have to be trusted, and they aren't contradicted anywhere. The 'average investor' really does refuse to learn what is needed to be learned, and suffers the consequences. But naive 'indexing' isn't the answer, either. As Taleb lays it out, that's merely to make a very risky bet, based on a very fragile prediction. When it comes to bond-investing, the problems just get exacerbated. Bond funds aren't bonds. Worse, they lack the upside of stock funds, but have all of their downside risks. (If an investor lacks the skills to time a stock fund, they lack the skills to time a bond fund.)

The game of owning individual bonds is a whole 'nother matter. Due to the impact of taxes and inflation, an investor needs to be pulling about 8% just to break even with respect to moving purchasing-power forward. That means he/she probably needs to be running a multi-sector strategy, and the only way to survive in that game is to bet widely and bet small, which means in-depth research isn't needed. If big bets are going to be made, then due-diligence and execution need to be almost flawless. But if bets are small --but consistent, persistent, and disciplined-- then you've just got to be right --on average-- about the average result of your basket of bets. That's a whole different and much more doable game. Buy widely, trying to avoid as much of the crap as you can, but never knowing --to the upside or downside-- if you're really getting it right, but being able to depend on --on average-- on capturing the average of what the asset-class (or strategy) --on average-- has offered. In other words, it doesn't take much skill to turn in a "market-beating" performance --relative to one's competitors-- which is plenty good enough for the girls I go dancing with.

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