Nassim Taleb tells a great story about Thanksgiving turkey’s in his 2007 book, The Black Swan. "Consider a turkey that is fed every day…Every single feeding will firm up the bird's belief that it is the general rule of life to be fed every day by friendly members of the human race 'looking out for its best interests,' as a politician would say.
On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief."
Source: Business Insider
So what’s a Thanksgiving turkey investment, and how can we avoid them? From my experience, investments that blow up have several things in common.
- Excessive leverage.
- Exotic, highly complex, strategies.
- Discretionary Management.
- No long-term track record or backtest.
- No quantitative measurements.
- Basic intuition.
- A Hedge Fund or newsletter.
It’s been said that if you can’t spot the sucker at the poker table after 30 minutes, it’s probably you. When it comes to making financial decisions with your hard-earned money, it’s best to maintain a healthy dose of skepticism. Hopefully the 7 points from this article can help avoid your money having the same fate as your next Thanksgiving turkey.
Jesse Blom is a licensed investment advisor and Vice President ofLorintine Capital, LP. He provides investment advice to clients all over the United States and around the world. Jesse has been in financial services since 2008 and is aCERTIFIED FINANCIAL PLANNER™professional. Working with a CFP® professional represents the highest standard of financial planning advice. Jesse has a Bachelor of Science in Finance from Oral Roberts University. Jesse manages theSteady Momentumservice, and regularly incorporates options into client portfolios.
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