Investing

The one rule in investing that everyone agrees on seems to be to keep your portfolio in balance. This means that based on your appetite for risk, you proportion your investments among different assets. As a simple example, say you want 50% stocks and 50% bonds. Suppose your stocks do well for a year or two, while your bonds languish. At the end of two years, you have 60% stocks and 40% bonds. At this point, you are supposed re-balance your investments by transferring 10% from stocks to bonds.

This means, if you didn't notice, that when one investment is doing well, you should not throw more money at it, but take money away from it. If you are making money in stocks, you should take some of that and put it in bonds, which are loosing money. In general, this suggests that if an investment is doing well, this is a strong indication that it will soon stop doing well, and vice versa. In other words, a fundamental rule of investing is that the best indication of a good investment is that it is doing poorly, and vice versa. I'm heading off right now to invest in Ames and Somalia.

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Edit: I thought I was kidding when I posted this, but I did a little research, and guess what popped up? This quote, for one thing:

"If the past is a guide, you might expect some of the worst performing stocks in the first decade of the 2000s to be among the best between 2010 and 2019." (USA Today)

Looks like I'll be hitting up American Airlines and Kodak Cameras.

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It seems to me that the digital world is over hyped. I would go so far as to say that history will look back on digital processing as the foible of the twentieth and twenty-first centuries. Nothing is binary - exclusively on or off - except in our imagination. I have been told that electrons, the building blocks of life, are neither here nor there until you look at them. Even in computers there is a transition stage for each switch where the current drops off or picks up, which must be accounted for. When we are finally able to progress to organic or natural processing, digital will be seen as horribly inefficient. Think of all the information that is lost when converting a continuous-time, indefinitely precise information stream into a finite sequence of zeros and ones. Preposterous.

P.S. Since I wrote this I came across this article. Who knows all that the future will bring?