When It Comes to Investing…

When It Comes to Investing…


The Big Q: Are you thinking about entering the realm of investing?

The Big A: If you are then you have to take heart in knowing that there are just 2 types of mistakes you can make if you do.

  • The 1st mistake is to just buy something: a stock, a piece of real estate, or the latest fad investment like Bitcoin (cryptocurrencies) and Cannabis, and it loses its value.

These kinds of investing mistakes happen, even when you work to minimize mistakes, you will never be 100% right, the best Wall Street participants average about 40%.

But, this does matter, you must have the discipline to minimize that mistake when it does happen. And, as long as you do not get heavy into the fad investments, you will likely do well over time as long as you did not overpay on entry

  • The 2nd mistake investors make is the called the ‘Sin of Omission’ or not buying anything. I know people who will spend hours researching companies, finding a few they like, and then not make the buy.

It is hard to know what is worse. In the short-term, avoiding a pullback feels great. But you miss out on the long haul. So, I would say the 2nd mistake is the worse over time.

Both these problems have behavioral in nature. Most people make decisions with the ‘caveman’part of our brains, and apply the philosophical parts of our minds to justify the decision next, other wise known as emotion, when pure discipline is required.

Investing means taking intangible representations of wealth and shuffling them around mostly non-physical assets is esoteric, and very easy to make plenty of mistakes on the journey.

Not 1 of us will ever be 100% at it, but there are ways pare down errors.

For investors always chasing the latest hot thing, recognizing the pattern is 1st and foremost. It is not easy.

“I can calculate the motions of heavenly bodies but not of the madness of men,” Issac Newton is said to have said about investing.

One must learn to recognizing value, and deviations from that value, that is what matters, and that value and price are not always the same.

If you have done your work and determine that a company is worth $100/share, you should buy if it is trading at $50. If it it trading at $95, the value is less obvious, and there are better opportunities elsewhere.

For any Hot spot there is usually a Cold spot that is more attractive to invest in, do your work and find it.

If you have commitment issues, know that you are required to marry a stock, not all of them can be core positions. If you like a company, and think it’s worth buying at a price close to, but not quite at the current price, you can at least put in a good to cancel buy order and see if you get it.

In Y 1969, Warren Buffett told me when I asked him to tell me everything I need to know about buying stocks, he said, “Paul, do your homework, find 1 you like, buy it, if it gets cut in half the next day, buy more, or sell it and move on.” I spent the next 2 hours talking to him about Ferraris,

It is possible to recognize value, a company that’s cheap may become even cheaper as time goes on. Back then Ferraris new sold for about $12 – $15,000 new, pre-owned for between $2.5 – 11,000. Now those vintage and classic cars sell for in the 10’s of millions of dollars, they are the most expensive cars in the world.

For non-stock investments there are not many things you can do if you do not want to commit to an investment.

I have learned that many investors who have trouble making a commitment tend to do better as soon as they have started on a consistent, regular plan of attack for their investment capital. I call it, “plan your work and work your plan” and that is Not Gambling, it is Investing.

The mistakes above that investors make cover a sizable degree of risk. So, recognizing which 1 is your weakness and knowing how to combat it is 1 more Key tool to reduce mistakes and maximize your potential for investment success. Meaning know your tolerances for risks Vs desire for rewards.

FYI, HeffX-LTN’s overall technical outlook for the major US stock market indexes at the week ended 12 April 2019 is Bullish to Very Bullish

  • NAS Comp +20.3% YTD
  • Russell 2000 +17.5% YTD
  • S&P 500 +16.0% YTD
  • DJIA +13.2% YTD

Remember, when it comes to investing, it is your money, so your responsibility and there will always be a trade.

Have a terrific weekend.

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