Investors Must Survive
This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
Weekend Reading
What lessons learned from skiing can you apply to investing? Author Luca Dellanna shares that with much like in a ski competition, successful investors are not typically the fastest, but the ones who avoid irreversible losses that succeed.
READ THE ARTICLEHe highlights the dangers of catastrophic losses caused by concentrated portfolios, often disguised as diversified ones. While diversification is critical, some investors resist it, preferring the illusion of certainty and potential high returns, even though it exposes them to significant risks.
Key takeaways: Dellanna warns against relying on averages when assessing your investment performance. Focusing on general returns ignores the individual, often perilous, paths taken by investments. Survivorship bias also plays a major role in misleading your investment choices, as successful high-risk strategies are often highlighted while failed ones are forgotten, reinforcing risky decision-making.
Moreover, the biggest survival challenge lies in managing your behavior. Poor investment decisions, such as selling during market lows, can cause lasting damage. Remember: Long-term investing success depends not only on performance, but also your ability to survive both internal and external pressures.