I have a new piece over at MarketWatch summarizing the market myths chapter in my new book. You can read the whole thing over at MW:
Financial markets are complex dynamic systems, populated by irrational and biased participants. Because of this we have a tendency not only to misunderstand how the financial markets function, but we tend to buy into myths that often harm our financial well-being.
But by better understanding the financial markets, ourselves and the behavioral flaws that drive these persistent myths we can increase our odds of achieving our financial goals. Here’s what investors need to watch out for:
1. You too can be Warren Buffett
Over the last 30 years the world’s greatest investor has come to be idolized. But the way Warren Buffett has amassed enormous wealth is often misunderstood. The myth of the simpleton from Omaha who just picks “value” stocks has driven an entire generation to fall for the myth that they can easily replicate what Buffett does.
Make no mistake — Buffett is not a simple value-stock picker. What he has built is far more complex and resembles something that few retail investors can even come close to replicating.
Berkshire Hathaway, Buffett’s firm, essentially acts as a multi-strategy hedge fund. Berkshire engages in sophisticated insurance underwriting, complex fixed-income strategies, multi-strategy equity approaches and tactics that more resemble a private equity firm than a value-based brokerage account. Replicating this isn’t just difficult — it might well be impossible.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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