Since I am just a lowly blogger I am going to "borrow" some investing rules I picked up from a trader who I admire for his frankness and simplicity. Jeff Macke has been a professional trader for over a decade and has in the past run a hedge fund. His articles appear all over the web, but few people past serious traders see his wisdom. His rules are generally the first sentence, then I will add some comments and add the last two rules.
1. Long term holdings that are losing money means nothing more than long term hope. Be prepared to take a loss and move on. You can not make money on invested capital that is just sitting there and doing nothing. Move it somewhere it can be making money for you. I have a former auto dealer friend who used to describe this way. "A bad used car investment is like a bitter pill sitting on the corner of your desk everyday. Each day you come in you look at it and think how bitter it is and avoid taking it. Each day you experience the same bitterness. The best way to get rid of it is to take the pill, experience the bitterness or loss one time and be done."
2. Anyone can make money, the key is to keep it. Live below your means and save the rest. You are constantly hit by media telling you if you buy this or that you will be happy. You also think expensive vacations, the latest tech gadgets, the biggest house, or most expensive car,will convince friends you are doing well. None of this works. The surest way to wealth and eventual true happiness is to save as much of your income and buy your early independence. Many refer to this as "go to hell" money.
3. Love your kids, family, and friends, everything else is a trade. No investment, no company, no stock, is forever. All things have a point where the best long term value is a sell or trade to something else with value not yet recognized. I sold advertising to two extremely successful auto dealers who were offered several million dollars for their dealerships in the mid 1970's, one sold, one did not. The one that sold now lives on Emerald Isle and has been retired for over two decades. The other, who experienced the bad late 1970's interest rate enviroment, is still working at a marina doing regular work. The guy retired I remember telling me that everything he had was for sale at the right price except for his family. I rest the case.
4. Smart entry point, dumb down exits. It takes research and due diligence to know when is a good time to buy something. Be it a news house, a new car, and most importantly a investment. If you just buy when you want it or on a whim that it might be good time you will almost guarantee a financial loss. On the other hand if you are smart on the buy, you can be dumb on the exit because if you bought low it is a good bet you are selling high. You might not even sell at the highest price, but nothing is wrong with ever taking a profit.
5. Everyone is brave until you punched in the face. Nothing like the first time someone punches you in the face, it changes your idea of fighting fast. As Dalton said in Roadhouse " no one ever wins a fight". You can talk a sweet game and tell everyone how smart you are until you get hit with a loss or the reality that you are wrong. So be brave, but again do your due diligence so you are better prepared for the loss if it comes.
6. A lousy plan beats panic. Any plan, and I do mean any researched plan, means you did your research and know the score. So when you see your investment getting hit hard you can make reasoned decisions about the future of your investment and that will keep you from panic at just the point it means the most. Panic will only bring sorrow and wish I had not done that regrets. Hard to do in theory, but necessary for future profits.
7. This is not a game of perfect. If you believe you will never make a mistake you are a fool. I can look back to many investments I regret. One time it produced a loss of six figures. Yes, I regret the loss and wish I had the assets back, but I also know it gave me experience and knowledge I would not have now that made me money later. I have a friend who shared in one of my losses and when we talk about it now we just laugh together at our foolish efforts. That in a nutshell is the way to handle a loss. Nothing ventured, nothing gained.
8. Take a chance Get out of your comfort zone. Break down your walls. The sooner you do this the better opportunity to improve your life. Most people do not succeed at their dreams, not because they do not dream, but because they limit themselves by not taking chances for success. Think about it, how often do you consider if I had done this or done that how much better off I would be now. Learn a skill you have considered, start that small business, make a career move, and try make your life better. If you do not do this, do not blame others who have achieved better for your non-achievement. I have a friend, who I expect will read this, that came to my employ with high and solid walls. Through the years I implored her to break down those walls and rip open that comfort zone. To date she has done so to some extend and achieved likely more than she expected just a few years ago. Fear is the largest impediment to your future. F stand for false, E stands for evidence, A stands for appears, R stands for real. Do not let false evidence appearing real limit your opportunities.
9. Do not care what others think of you, except for being a person of integrity. Anything beyond keeping a good name is useless. If you allow yourself to be fenced in on your actions and attempts at life success you will never succeed. You must use your own talents and mind to make your life. You are just as important and special as anyone else. Any success in my life was brought on by the simple fact I did not need anyone else to tell me I had done something right or well. I knew it was so by my own internal beliefs and frankly lack of the need for approval. Set a goal, be honest with yourself and others, and go for it.
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