Almost Everything You Know About Investing Is Wrong

Many of you have some fundamental beliefs about the process of investing. These beliefs understandably guide your investing behavior. Unfortunately, they are often dead wrong. This is not surprising, because the financial media and the securities industry have a vested interest in encouraging short-term thinking and other emotional behavior harmful to your returns.

Here are some examples of harmful beliefs.

Bonds have lower volatility than stocks and lower expected returns. When I mention “bonds,” I am referring to 10-year U.S. Treasury bonds. I suspect most investors, and even many financial advisors and brokers, believe that 10-year Treasury bonds are “safer” and less volatile than stocks. As a consequence, you would expect these bonds to have lower historical returns.

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