Heads I Win, Tails I Win
Why Smart Investors Fail and How To Tilt The Odds In Your Favor

Spencer Jakab
Portfolio/Penguin 2016

Very good down to earth advise. No stock tips, just attitude tips.
Starts off with two promises;

1. no Algebra or Greek letters
2. he’s not trying to sell anything other than the book, (no subscriptions or newsletters)

Trading Tips:
Ignore the headlines and don’t allow frequent trading to eat up future returns. By the same token don’t be overly cautious and adopt a “set it and forget it” approach.

As far as headlines, WSJ and channels like CNBC see their best traffic on the very worst days for financial markets. Bad news is featured much more prominently than good news.

The market is volatile. Bear markets can be very scary and devastating but can also fantastic opportunities for growth. The volatility of a portfolio is measured in standard deviations – the higher the standard, the choppier the portfolio.

Try to avoid market timing but utilize a faithful re balancing and sometimes go against the flow. Today there is no technical part of investing that a person can do that a computer algorithm cannot do more cheaply and efficiently.

Check out SigFig, Asset Builder, and Anyplace

Also look at full fledged rob investors like Betterment and Wealthfront, (Schwab has something similar.)

Stocks are the only market where people run away when there is a sale and line up at the door when prices have doubled or tripled.

The P/E of a company is important. It denotes how cheap or expensive it is. The Schiller P/E or one cyclically adjusted is better.

A cheap market can get cheaper and an expensive one more expensive for quite a while.

Most index funds own stocks in proportion to their market value, therefore they own more of what just went up in price than what just went down.

Jakab murders the reputations of most well known stock pickers by exposing their history. Most of them were either too early, too late, or too often.

Go for singles and doubles rather than home runs.

Recommended: The Prudent Speculator and AFAM Capital. David Dreman’s book Contrarian Investment Strategies: The Psychological Edge.

Most analysts are horrible stock pickers.

Sell side analysts actually shape the market’s expectations. Their estimates are compiled by services like Bloomberg, Reuters, etc. Every quarter 70% of companies beat estimates, 10-15% are in line, and 15-20% miss. This means that the odds of a company’s stock rising following quarterly results are the same or even slightly lower than for any other day.

Studies at Washington State University based on sports analysts showed that it matters more how emphatic an analyst was rather than how accurate.

Crowdsourcing predictions could replace analysts.

Studies by Tim Courtney and by Vanguard conclude that Morningstar ratings are useless.

Hedgefund strategies mostly just represent market risk. They represent themselves as uncorrelated to the market but they are very much like long/short mutual funds. Very few mutual fund managers display sufficient skill to justify their cost.

7 Habits of Highly Ineffective Investors
  1. Overconfidence
  2. Combine your morals with your money
  3. Buy whats fashionable
  4. Reach for yield
  5. Use exotic products to enhance returns
  6. Trade frequently
  7. Use a system

People who monitor their portfolio daily earn 0.2% less than average, 2X per day 0.4% less. Average monitoring =8X per month.

Markets reward discomfort. Uncertainty sometimes = profit.
Time to buy is when there’s blood in the streets, even if it’s your own.

Don’t let human emotion interfere with your investing. Do look a dividend gift horse in the mouth. Buy good dividends but avoid those that might not be sustainable.

  • S&P Dividend Aristocrats
  • SPDR S&P Dividend Fund (SDY)
  • Schwab US Dividend Equity ETF (SCHD)


It boils down to 7steps:

  1. Know yourself
  2. Stop zigging when you should zag. Remove need and temptation to make decisions and make as few of them as possible.
  3. Learn to be cheap and lazy. Investing results are inversely proportional to effort. Low cost passive funds work best
  4. Don’t confuse luck and skill
  5. Turn lemons into lemonade. Embrace risk and rebalance on schedule
  6. Use history. It may not repeat itself but it does rhyme
  7. Don’t be afraid to ask for help. But only as much as you need.

Best portfolio:
10% short term government bonds
90% in a very low cost S&P 500 Index Fund



04/17/2017 7:59am

This is definitely an eye-opener. I am planning on investing when I finish my studies. My parents gave me a good amount of money to help me start up my life when I indulge in the business world. These tips are mind-blowing. Now I know why most smart investors fail.

11/15/2017 11:00pm

Out professor once told us in one of our discussions about management that it is never good to be too good at something. Overconfidence is one of the most common traits that every businessman has that leads to his ineffectiveness. This is one of the most important lessons I have learned in school. I started up my own clothing line having this saying in my mind. This is the reason why my business became successful in such a short period of time.

06/19/2017 2:35pm

It's a pretty cool book name. I want to read it after your awesome review.

09/17/2017 5:37am

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