Jeremy Grantham of GMO has posted a quarterly letter containing some timeless investment advice.
1. Believe in history “history repeats and repeats, and forget it at your peril”
2. ‘Neither a lender nor a borrower be’ " Leverage reduces the investor’s critical asset: patience."
3. Don’t put all of your treasure in one boat " the more investments you have and the more different they are, the more likely you are to survive those critical periods when your big bets move against you"
4. Be patient and focus on the long term " If you’ve waited and waited some more until finally a very cheap market appears, this will be your margin of safety. Now all you have to do is withstand the pain as the very good investment becomes exceptional."
5. Recognize your advantages over the professionals " The individual is far better-positioned to wait patiently for the right pitch while paying no regard to what others are doing, which is almost impossible for professionals."
6. Try to contain natural optimism " it is easier for an individual to stay cool than it is for a professional who is surrounded by hot news all day long"
7. On rare occasions, try hard to be brave " You can make bigger bets than professionals can when extreme opportunities present themselves"
8. Resist the crowd; cherish numbers only " hero-worship the numbers and try to ignore everything else"
9. In the end it’s quite simple. really " GMO predicts asset class returns in a simple and apparently robust way: we assume profit margins and price earnings ratios will move back to long-term average in 7 years from whatever level they are today."
10. ‘This above all: To thine own self be true’ " To be at all effective investing as an individual, it is utterly imperative that you know your limitations as well as your strengths and weaknesses."
Read the full quarterly letter.