Seeking Alpha – How to Gain Knowledge and Have Power

We all know “knowledge is power”. Why? As people gain more knowledge, they have choices to make. And as we gain knowledge the choices can be more effective and lead to better results. Here is a simple example: If someone does not understand the concept of gravity, they may go walk off a cliff and get hurt. Because you have knowledge, you can make a better decision with a better outcome.

Sources of Knowledge

Acquiring knowledge takes time, effort, failure and the capacity to learn. All this takes time and consistent learning and practice. In other words we can apply our knowledge to gain greater freedom, greater leverage and compound good decisions over the arc of their lives. Many of us lucky enough to live in the educated developed world cannot believe some of the human problems we read about in the news. Fortunately in the long arc of human history it appears that human suffering is diminishing due to advances in science, technology and the rise of strong democratic institutions and laws

Not A Straight Path Forward

Things do not always progress for the better, at times there are setbacks of course. In fact, if we let things go societies can plunge back into “dark ages”. It appears to be getting harder and harder for bad actors to get away with their crimes. I believe the bottomline is that much of this has to do with the democratization and spread of knowledge. Remember, knowledge is power!

More tools and easy access to knowledge

Same holds true for investing. Knowledge is power. I have been investing now for about 20 plus years. It has been an incredible time to see the much improved and lower cost tools for common investors. These simply did not exist 30, 40 plus years ago. But we all know that no one has a crystal ball when it comes to investing. Even the greats like Warren Buffett get it wrong sometimes.

A simple approach

For most of our invested capital, it’s probably most wise to keep things simple. This is the beauty of the investing philosophy of those and others like Vanguard Bogleheads. They understand that in the short and mid term markets can be wild and volatile. But over the long arc of the market, it tends to gain value over time. This is the beauty of 3 simple investing concepts:
  • Own a broad swath of the market (diversify among individual stocks and asset classes)
  • Keep fees low
  • Dollar cost average into owning more shares over time.

10% to 20% Active investing

Some folks, like yours truly, are not completely satisified with a totally passive approach to investing. I like to take 10-20% of assets and choose stocks, play options, dabble in alternative investment vehicles, etc. The idea here is that if I make a bit more, then great. Another advantage of this exercise is learning about new companies and new things. This adds to the whole knowledge is power concept of things.

52%

About 52% of the US population is invested in the stock market. That is a lot of people, but down from an all time high in 2007 of about 63%. Most folks need information to make the best investment decisions they can. This combined with a simple approach can lead to some success over long periods of time.

Seekingalpha.com

Anytime I am considering making an investment in an individual security, I always like to do research. I think one of the best platforms for research is the site seekingalpha.com. Seekingalpha.com takes commentary and analysis from many different perspectives and provides it for the public to view. Many well known and respected investors use the platform and write articles that are featured on the site. I basically type in the ticker symbol for any stock and then the site lists many articles and analysis of that particular investment.

Can we tame our Monkey Brains?

The big question going forward is will we wield all these powerful tools and knowledge in a responsible manner? Most experts believe that a simple long term approach to investing is the most successful. This includes several factors:
  • Invest in broad index funds that have a collection of high quality stocks in different sectors and of different weights (small, medium, large cap).

  • Reinvest dividends and capital gains.

  • Keep fees low by using a company like Vanguard or other large firm that is focused on low fees.

But we have monkey brains that are present moment biased. We have the capacity to form both good and bad habits, whatever serves us in the immediate moment. We discount the future and turn a blind eye to information that contradicts our perceived model of the world. Let us strive to be wise enough to wield knowledge and power for the betterment of ourselves, our families and the world.

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