Jeremy Grantham’s quarterly GMO letter is out. It is a long rambling look at everything from Tesla to Fracking to Fertilizers to Food.
But the narrative culminates with how as a young lad, Grantham made a trade based on a neighbor — legal inside information. He explains how that worked out, via his 8 lessons learned during his tenure on Wall Street.
Investment Lessons Learned: Mistakes Made Over 47 Years
1) Inside advice, legal in those days, from friends in the company is a particularly dangerous basis for decisions; you know little how limited their knowledge really is and you are overexposed to sustained enthusiasm.
2) Always diversify, particularly for your pension fund.
3) Fraud, near-fraud, or colossal incompetence can always strike.
4) Don’t buy stocks yourself if you’re an amateur: invest with a relatively rare expert or in a low-cost index.
5) Investing when young will start your brain turning on things financial.
6) Painful errors teach you more than success does.
7) Luck helps and finally…
8) Have a convenient mother to be the fall guy.
Year-End Odds and Ends
GMO FEBRUARY, 2014