Advancements successful concern products and trading platforms haven't altered long-standing investing fundamentals, according to neurologist and best-selling fiscal writer William Bernstein.
Bernstein, who released the 2nd variation of his 21-year-old classical concern guidebook "The Four Pillars of Investing" this summer, joined CNBC's Bob Pisani connected "ETF Edge" this week.
The archetypal pillar of investing according to Bernstein is theory, successful which helium stressed that hazard and instrumentality are "joined astatine the hip."
"If you privation a perfectly harmless portfolio, you're not going to person precocious returns," Bernstein said. "If you privation the precocious returns that travel with equities, you're going to person to prolong bone-crushing losses."
His 2nd pillar is history. It plays disconnected the thought markets overshoot connected the upside and the downside, and lone bottommost successful retrospect.
"Markets don't get either precise costly oregon precise inexpensive without a bully reason," Bernstein said. "You person to conscionable beryllium capable to support your subject and recognize that the expected marketplace instrumentality has to bash with the perceived hazard of the market, and the perceived hazard of the situation you're in."
The 3rd pillar is psychology. Bernstein believes investors thin to beryllium overconfident astir their quality to prime stocks.
"The metaphor I similar to usage [for investing] is that you're playing tennis with an invisible opponent, and what you don't recognize is the idiosyncratic connected the different broadside of the nett is Serena Williams," Bernstein said.
Bernstein besides emphasizes that investors tend to beryllium overconfident connected their ain hazard tolerance.
"One of the things I learned some successful 2008 and much precocious during the March 2020 Covid swoon was that however you behave successful the worst 2% of the markets astir apt describes 90% of your wide concern performance," helium said.
Bernstein's last investing pillar is business. It's the conception the superior concern of astir money companies is collecting assets alternatively than managing money.
This thought is 1 of the reasons Bernstein feels affirmative astir the exchange-traded funds concern and its relation successful reducing fees.
"One tin acquisition a batch of concern products present for adjacent to thing successful presumption of expenses — a mates of ground points," Bernstein said.
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