Conventional Nonsense

This page is my idea of humour. Is what you believe about finance actually true?

I love researching the “conventional wisdom” and finding surprising things that are not true.

For example, most investment talks include comments on how the economy is doing and expectations for the economy. You may be surprised to know there is no evidence that the economy and the stock market are correlated at all. The stock market does just as well (or even better) on average in countries and periods of time with weak economies.

Don’t believe me? Look at the numbers.

In fact, when I listen to fund managers, if they talk about the economy, I take it as a sign of lack of knowledge. A good fund manager would be focused on his specific holdings, not the economy. Of course, I realize some will mention the economy only because they realize brokers and financial planners don’t know the economy is irrelevant and expect them to talk about it.

Another example is the “peak oil theory”, which was widely accepted as true just a few years ago.

There are many myths about the stock market. From a financial planning perspecitve, the most important one is that the long term returns of the stock market (20-30 years) are far more consistent than most people believe. It is volatile short and medium term, but surprisingly reliable long term.

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” (Mark Twain)

You will be surprised how much of what you believe about finance that is just not true.

These articles are entertaining (if you have my warped sense of humour) and thought-provoking. Open your mind to new ways of thinking. Plus you can quote them to impress or debate with your friends!

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