Worth Reading

I never miss Jeremy Grantham’s quarterly GMO letter, the newest version of which is just out. You shouldn’t miss it either. This time he looks at a variety of issues including energy, commodities, U.S. GDP, an early (then legal) foray into insider trading and eight investment lessons he has learned. All the lessons are valuable, but I was particularly struck by #6, perhaps because it’s a point I make often: painful errors teach you more than success does. Here’s the list, but don’t miss the entire letter.

1. Inside advice, legal in those days, from friends in the company is a particularly dangerous basis for decisions; you know little how limited their knowledge really is and you are overexposed to sustained enthusiasm;
2. Always diversify, particularly for your pension fund;
3. Fraud, near-fraud, or colossal incompetence can always strike;
4. Don’t buy stocks yourself if you’re an amateur: invest with a relatively rare expert or in a low-cost index;
5. Investing when young will start your brain turning on things financial;
6. Painful errors teach you more than success does;
7. Luck helps; and finally,
8. Have a convenient mother to be the fall guy.

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