Investing by Beating the Fear & Greed Index

I have been investing money for almost 60 years and I continue to wonder how is it still possible that bankers, fund managers, financial advisors and large numbers of journalists continue to believe the world’s biggest myth that they know or can forecast what is going to happen to the prices of shares, interest rates, houses and commodities.

Björn Wahlroos, Jorma Ollila, Warren Buffet, Donald Trump, Christer Gardell, Larry Fink, (me too), and thousands of”professionals do not have a clue where prices will be tomorrow, next summer, or in 10 years time. They may wish that they could forecast because that would make them even richer! However, unless they have insider information about a special investment situation, they know just about as much as any other ordinary person on this earth, and that is close to zero!

Many people lose money. Most investors will make money because they invest in businesses, the purpose of which is to make money. A few do very well, most of them keep their head above water, while plenty lose money, and some will go bust. You always hear about the lucky few that make a lot of money because everybody wants to be a winner, or loves a winner. Winners are very rare compared to the bulk of the market, and most of the people involved with winners did not actually create the win, they were just employed at the right time in the right company!

Many other rich people have experienced big losses and other negative challenges. One excellent example is Steve Jobs who lost his job in 1985 when Apple floundered! He was a great innovator who persevered and got lucky in the end.

Jorma Ollila was successful in a big way, but lost out later, big time, to Steve Jobs…

…and if we are to believe some of the history books it was Björn Wahlroos & Co. who tried to sell the early loss making Nokia to Ericsson … Wahlroos was lucky that a foolish government sold off Postipankki at a ridiculously cheap price to him and his friends. He started his reign over Nordea 20 years ago when the share price was €4,5 and now it is €5. That was a great investment from the biggest investment banker in the Nordics, unless, of course, you had bought and sold the shares at bottoms and tops respectively, a feat that, I am sure, nobody has ever done.

People like Warren Buffet, Christer Gardell, Larry Fink, and Björn Wahlroos have all got rich because they run companies that managed other peoples’ money. They have succeeded by persuading many ordinary people and institutional investors to invest with them for an annual fee that is a percentage of the amount of money invested. They get their fee even if the value of the investment goes down and that fee feeds the huge salaries and bonuses that these people take. That is a great investment that only a few can reap…

For the rest of us investing is not a fool’s game but a way to secure the future. Investing is normally pretty safe so long as you spread your purchases over time and with different shares and other assets – over years… 

Think long-term. You can and should invest by applying the following important investment rules – it is a life-long thing to do and taken seriously. Hold 3 month’s store of cash always in your bank account or under your mattress. You should own home, renting is OK for the few who must move around or cannot afford to buy. You should also invest in your own education, training, in languages, the STEM’s and culture. Invest in your family, friends and networks.

Don’t listen to salesman. You should buy shares, and bonds – but do not buy bonds now because they are not good investments just now. The interest rate is too low for bonds with low credit risks.Higher yielding bonds are too risky today – many such bond issuers will go bankrupt. Buy a selection of around 10 to 15 different shares of stock exchange companies in fairly equal amounts over time. Do not worry too much about the names. Some will do well others not so well. Ignore recommendations, and close your ears to trading suggestions from brokers. Buy from Nordnet or other low cost brokers. Do not use banks because they are terribly expensive. Rebalance every five or ten years. Hold some ETF’s but only low cost ones – ignore the big banks funds because they cost you 1% to 3% each year and that is a lot of money. Finally, do not spend too much time reading the business press – they make their money by servicing banks and brokers, and by selling you their (bank’s and brokers) opinions which are not worth much for you, but much for them!

By Nicholas Anderson – First published in Swedish, May 2020 in Affärsmagasinet Forum / Forum Business Magazine 

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