! My Investment Letter: Words of Advice for My Grandchildren
Charles D. Ellis Ph.D., CFA, founded Greenwich Associates international strategy consulting firm in 1972. He now serves as an investing consultant to large institutional investors, government organizations and wealthy families. His latest book is “The Index Revolution” (John Wiley & Sons, 2016).


Max Hinchman from CA posted over 4 years ago:

I concur! It sure would have been nice to have had a bit of this insight and guidance 50 years ago. And, perhaps, I would not have had quite the financial losses that occurred.

Thanks for the "letter".

Ronald Engelsman from SD posted over 4 years ago:

Fifty years ago you would have had a very difficult time finding a good index fund.

Also, many of these comparisons of the performance an individual investor in common stocks achieves vs. an investor in index funds do not account the formers ability to take much better advantage of tax laws (e.g., donating shares of highly appreciated stocks to charity, reaping tax losses on certain positions etc.).

It's commonly accepted that portfolio rebalancing is a useful tactic. However, there are far better and far more opportunities to do this with individual stocks in a portfolio than with a few index funds in a portfolio.

Fred Warner from CT posted over 4 years ago:

Obviously Dr. Ellis is good at what he does, far better than most amateurs. I spent my life as a professional archaeologist and consider myself better trained and more productive than, again, most amateurs. In no way does that denigrate weekend archaeologists; it merely says that archaeology is my profession. My problem with the now generally accepted theory that index funds are the best thing going is that I think there is a better way. There are fund managers who are very good doing what they do professionally. Why not take advantage of their expertise? If a fund manager can return an annual l5-20% for a period of 10 years or more does that not demonstrate enough expertise to let him take the additional 1% or so? I watched my Latin America fund give me those returns for years, not watching it daily but certainly selling all of it after a year of disappointing returns. True, the funds I invest in are at the upper end of the risk scale but, with occasional checking in, they seem to do better than the market, which I understand is what index funds are tied to. It is a total mystery to me why people invest in funds that don't "beat the market"; there are enough no load funds that do.

W Worth from WA posted over 4 years ago:

The "harvesting" of losses for a tax benefit against gain is an important step for individuals. Capturing of gains are important also. My rule is any gain exceeding 30% "annualized" is a trade. Therefore any such gain is captured regardless of the period held for the security. I also own significant index funds which are held as Dr. Ellis posits.

Vaidy Bala from AB posted over 4 years ago:

As an individual retired investor, it is my opinion one invests 80% in long term stocks and 20% in fast growing stocks both based on sound fundamental and technical analyses. It is easier to teach children graphical method as they learn statistics to understand market movements, reminding a picture is worth 1000 pages of text, boring!

Walter Stoddard from CO posted over 4 years ago:

My belief and one that I intend to write in a letter to my kids and grand kids is the importance of stock selection and long term investing. Choosing stocks for long term holdings that have a long history of returning or growing assets for shareholders or newer companies that make products or provide services that provide real value to the public. It is these companies that one can buy and simply hold forever and that over 30 years of growing dividend payments combined with stock splits can turn a $10K investment into a $5 million investment. There's numerous examples of such companies out there and there's no reason to believe that the success we've had over these last 35 years will not continue in the future with those companies that provide necessary services & value and that have a mind set of returning value to shareholders.

George Sandvig from CA posted over 4 years ago:

As 35 year investor who has tried almost every strategy available, I made a copy of Mr. Ellis's letter and gave it to my Son. It is my opinion people that fancy themselves as stock pickers have not tracked their true returns due to their losses. Its like people who go to Vegas and just tell you about the times they won big. If 75% of professionals with all the technology in the world at their disposal can not beat the market, I think a person is foolish to spend their time selecting individual stocks. Kudos to Mr. Ellis, he is spot on with his advice, ignore it at you finical

Jim MacGillivray from NM posted over 4 years ago:

As 72 year old former investment advisor, I really like this approach. Some may like to consider the new Aristocrat ETF as part of their portfolio. Symbol is NOBL. It offers a lot that is consistent with recommendations in this article.

Jon Pollock from WV posted over 3 years ago:

I enjoyed reading Dr. Ellis' perspective as well as the accompanying comments. As with many amateur investors, I have probably made several of the taboo moves described and losses, along with gains, have been part of my investing life cycle. One very important issue I think is to have this conversation with young people. My father was ill-prepared to advise me about any financial matters and, as a result, I was subject to the greed and avarice of a broker who churned a previous account. I felt almost helpless because I was inexperienced. The most important thing Dr. Ellis illustrates in his "letter" is to have the talk with your children and grandchildren and educate them. They will make choices, good and bad, but at least they will have the tools to make the choices knowingly.

Don King from North Carolina posted over 2 years ago:

The very first and THE most important long-range investment one can make is 10% off the top to the Lord. It's absolutely amazing how much better the remaining 90% will function for you, and the returns can't be beat!

a. blanchard from texas posted over 2 years ago:

This is as good as it gets. I bought my 1st stock the day the Korean war broke out and have owned stocks ever since. My father in law was my advisor. His slogan was "buy quality and hold", advice he had received from a retired colonel who worked for MLPFB. This is in a way a summation of the advice in this letter. I have been comfortably retired for 32 years following this rubric.

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