Rational Advisor

In 1990, Paul Samuelson, an MIT Professor of economics won the Nobel Prize for Economics.

Here’s his investment Philosophy

“I tell people, investing should be dull, it shoudl be like watching paint dry or grass grow. If you want excitement, take $800 and go to Las Vegas”

Paul’s telling us that the best way to invest is to make your portfolio full of dull stuff, and not follow what’s hot and exciting. In fact if it’s in the paper for how well it’s doing, or returns are great - shy away. The two most common things that lead us to want to have excitement are. One, the unavoidable chatter from friends and relatives who claim to have achieved killer results with their investing, and the other is the financial media’s focus on the star stocks, funds and money managers of the moment. In a vacuum, making 6% to 9% a year on average over a five to ten year period sounds fine. But when you hear about a guy who doubled his money in the past few months, those returns seem almost embarrassing.

Some examples of the kind of boring investing that people should be doing: owning bonds, even while interest rates are low; keeping some money in cash, even though the returns are even lower than for bonds; and have those boring dividends that provide a consistent income stream, look for managers that focus on risk and then return, as opposed to those that want return and then consider risk. Rebalance by taking profits from successful -investments and putting them in underperforming holdings.

Rational

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