A substantial amount of what we write has to do with investments. This is intentional; the reality is that if you never invest, you are unlikely to achieve substantial wealth.
Given the importance of investing, we’ve compiled five basic investment tenets to live by. A lot of trial and error has gone into completing this list and we believe anyone looking to improve their investment track record will benefit from following these rules as well. They are rooted in common sense and run contrary to much of what you will find in the financial media.
1) Price Is Everything
This rule could just as easily be “Patience” since that is what it is really about. We never pay top dollar for our investments. A great company or property at an expensive price cannot be expected to provide outstanding results. Paying too much all but ensures you will receive substandard performance from your investments. That said, paying full value for a quality company can be worth it.
People worry far too much about “missing the next big thing” and overpay.
Our mindset is simply that if we really love a company and want to own it, we can:
- a) Wait on the sidelines for a better price,
- b) Initiate a small position and wait patiently to buy more lower, or
- c) Sell a put option on the stock to get paid to wait. If we miss the investment altogether, so be it. Paying too much destroys wealth which is counterproductive since we’re in the wealth-creation business.
(Warren Buffett in the video featured above.)
2) No Excuses
We believe in complete accountability in life and investing. If you are willing to take credit for making a good decision, you should likewise take ownership for your mistakes. After all, our best lessons come from our defeats.
Successful investing spans the course of an entire life. The sooner you adopt a can-do mindset that allows for and corrects mistakes, the sooner you will be on the path to prosperity. Listening to the media, the impression is that it is okay to blame the economy, weather, political unrest, or any other inane source to justify poor performance. Do not fall into that trap with your investing or your personal life. Be accountable and accept no less from yourself.
3) Rarely Watch Investment News While The Market Is Open
We very rarely follow the investment news while the North American markets are still open. We do not day-trade and never will. We have never and will never make a trade hoping to skim a quick 2-5% profit. We are invested for the long-term and the reality is that 99% of what gets discussed is just filler.
4) Listen To What Other Investors Are Saying, But Form Your Own Opinion
Just because someone has had success in the past does not mean they will have success in the future. Blindly copycatting someone else’s investment decisions is not an investment philosophy we subscribe to. You need to do your own homework if you want to have long-term success.
Knowing that some other investor has purchased or sold a stock tells you absolutely nothing about why they sold it, so how would you know whether it is a good idea for you to do the same? Even if they state their reasons, how can you be sure they are being forthcoming and honest in their remarks? Think about it. You are responsible for making your own decisions.
Even if you use an advisor to guide your investment decisions, you need to take ownership over the fact that your money is your future and if something they are telling you doesn’t seem to make sense, your gut instinct is probably right. Make sure you understand everything going on with your money. You do not get to abdicate all responsibility over your finances simply because someone is taking a percentage of your money through fees every year.
5) Ask “Who’s Getting Paid?”
The media bombards us more now than at any other time in history with advertisements promoting products. Whenever we analyze prospective opportunities, we always ask who is getting paid, how they’re getting paid, and how much they’re getting paid. The reality is that if there are many wheels to be greased in advance of us, there probably is a poor shot at us making a worthwhile profit.
If someone is selling you something and is unwilling or unable to answer any or all of these questions, simply thank them for the opportunity and walk away. Always remember that if someone is asking for your money, you should never be shy to resolve any questions you may have. We believe full disclosure is a two-way street. Be sure to understand what you are getting involved in and your future self will be sure to thank you.
– The Get Rich Brothers
What rules do you live by?
Pictures courtesy of pixabay.com