Like a lot of baby boomers, I've just turned 60. I've seen four recessions, several market sell-offs and one near depression. I'm also saving for retirement while trying to fund two college educations for my daughters.
I've learned much over the years from some of the greatest investors and economists on the planet, so I'm really fortunate. Here are the highlights:
Beware the 'animal spirits'
The markets are often more animated by "animal spirits" than earnings and dividends. I learned this, from all people, the great economist John Maynard Keynes, whose portfolios I drilled down into in the Cambridge University library while researching my book Keynes's Way to Wealth.
Keynes, despite his demonization by some, was one of the greatest investors of all time, making millions between World War I and the end of World War II.
Keynes pioneered early forms of value stock picking and behavioral finance. He found that expectation and emotion are two powerful drivers of bubbles and crashes. If you keep that in mind, you can avoid loading up on single stocks or funds at the wrong time.
Avoid the market timing temptation
As I've learned from loading up on tech stocks in 1997-99, you think you're on top of the curve, when in fact you're investing at the crest of the market. We can't know enough by looking at the upward momentum of earnings, technical analysis and stock prices. Joseph Stiglitz, a Nobel prize winner in economics, has often warned about "information asymmetry."
Some investors know more than others (often with inside information) and can trade at lightning speed with algorithms that can anticipate and exploit market swings. You don't stand a chance against the robots. It's nearly impossible to know the best time to buy and sell. More often than not, you'll get burned.
I have interviewed Nobel Prize winner Robert Shiller several times, who authored the classic Irrational Exuberance. In doing so, I also discovered that "narrative economics" – the contemporary popular belief about market behavior -- can often mislead us. So ignore the "story" about stocks or why the market is up or down. Invest for the long term and ignore the noise.
The market is nearly impossible to beat
After hearing University of Chicago Nobelist Eugene Fama, the father of the Efficient Market Theory, speak several times, I'm convinced that I will never have more knowledge than the market as a whole. And if I invested with a winning manager? It's unlikely he or she could continue the streak, or that the performance was due to anything but luck in Fama's view, which is supported by decades of research.