Summary: Debunkery

Review and Analysis of Fisher and Hoffmans' Book

BusinessNews Publishing

• Publisher: Must Read Summaries
• Year: 2016
• eBook ISBN: 9782511018712
• Topic: Betriebswirtschaft
• Subtopic: Aktien

The must-read summary of Ken Fisher and Lara Hoffmans' book: `Debunkery: Learn It, Do It, and Profit from It - Seeing Through Wall Street's Money-Killing Myths`.

This complete summary of the ideas from Ken Fisher and Lara Hoffmans' book `Debunkery` shows that in order to be a successful investor, you have to avoid the common errors most people make repeatedly. Investors usually demand absolutes but they don’t exist – even the very best investors are only right about 70% of the time. In their book, the authors advise you to debunk all the conventional investment advice you hear on TV and do your own thinking. This summary will teach you how to move ahead and use your intuition, your gut instincts and your common sense in order make better investment decisions.

Added-value of this summary:
• Save time
• Understand key concepts
• Expand your investment knowledge

To learn more, read `Debunkery` and discover the key to using commonsense to make the right investment.

Summary of Debunkery (Ken Fisher with Lara Hoffmans)

Basic bunk which can make you broke

The human brain generates lots of fundamental misunderstandings when it comes to investing. We can’t help it and we’re not even aware we’re doing it. You have to get into your head the thought human ingenuity is boundless and that ingenuity will ultimately show up in the future earnings of firms which, despite the odd setback, will always rise long term. Investing requires grit, discipline and a skin as thick as an alligator.

1. Bonds are safer than stocks

Bonds feel “safer” because they promise a fixed rate of interest but the problem is bonds can actually lose money in the short term as well, particularly if you have a period of inflation. In 2009, for example, bonds fell 9.5 percent while world stocks were up 30 percent. Admittedly, stocks are more volatile than bonds but over the long haul (80 year time frames), stocks have always beaten inflation and generated some sizable gains as well. Stocks are safer than bonds because they appreciate in value more consistently over the longer term.

2. Well rested investors are better investors

The suggestion here is when people are so worried they can’t sleep at night, they should be in bonds rather than stocks. Over the past thirty years, US stocks have gone up in value by 2,509 percent compared with the 524 percent gain generated by bonds. Put another way, 97 percent of the time, stocks outperform bonds by a margin of 3.7 to 1. Bonds out perform stocks 3 percent of the time and when they do have a margin of 1.1 to 1. If anyone should be losing sleep, it’s those who forgo superior long-term returns in exchange for less perceived volatility - bondholders. There’s no way around it - if you want stock-like returns, you’ve got to be prepared to stomach stock-like short-term volatility.

“And if someone sells you on stock-like returns with materially less than stock-like risk, you maybe talking to a con artist. Being 100 percent ripped off will definitely cause you to lose sleep.”

– Ken Fisher

3. Retirees must be conservative

Perceived wisdom states people about to retire soon should have a portfolio full of Treasuries and cash. That’s dumb, because it doesn’t take into account all the risks involved. For one thing, you (or your spouse) might end up living ten or twenty years longer than you’re planning and you don’t want to run out of money in your old age. Secondly, there’s the risk when your bonds mature, the prevailing rates will be lower not higher. Thirdly, there’s the opportunity risk of missing out on the chance to invest in growth stocks. And finally, there’s also the potential for inflation to happen again in the future. The reality is without risk, you won’t get growth. Without growth, the value of your investment portfolio will be ravaged by withdrawals and inflation. Even if you’re near retirement, you still have to think long-term and keep some of your portfolio in stocks. That’s the only way you’re going to adequately fund the rest of your life.

“Investment is a probabilities game, not a certainties game. Included here are those misperceptions I’ve run into most in recent years - the ones I think you’ll run into the most. There’s real power in seeing the world more clearly than most.”

– Ken Fisher

4. Age equals asset allocation

Thousands of books and an army of investment professionals suggest your investment strategies should vary according to your age. The reality is your age is one factor, but by itself it’s not the main driver of your investment approach. Simply put, age isn’t all that matters. Three other factors which are important in determining asset allocation are:

• Time horizon – how long you need your assets to last. You don’t want your assets to die before you do or before your spouse does.
• Return expectations – whether you want to see growth or not. Most people want some growth to combat inflation and to maximize their old-age lifestyles.
• Cash flow needs – whether your portfolio needs to cover living expenses at some future time and what those needs will be.

Everything has to be factored in, not just what your age is.

5. You should expect average returns

Con artists will tell you high and positive returns year in and year out are possible. That’s crazy. Getting above-average gains every year is a pipe dream. It can’t be maintained. Normal returns are the exception rather than the norm. When you study the long-term performance of the stock market, you’ll see about two-thirds of the time, stocks are either up big or way down. To average 10 percent a year, there will be some stellar years and some forgettable years along the way. Volatility is an undeniable fact of investment reality.

“To my knowledge, no one has ever achieved market-like returns without some market-like downside. If you want to achieve something close to stocks’ long-term average, you must accept downside volatility. No way around that.”

– Ken Fisher

6. “Capital preservation and growth” is possible

It’s impossible to preserve your capital and to grow your capital simultaneously. Those two investment strategies go in diametrically opposite directions. To get even a modest amount of growth, you will have to accept some ris...

Table of contents

• Title page
• Book Presentation
• Summary of Debunkery (Ken Fisher with Lara Hoffmans)
• About the Summary Publisher
• Copyright