Comment: From the school of hard knocks

(See in situ)


From the school of hard knocks

Some good suggestions offered by others so far. I go along with the advice to stay focused first on what is important, your body, mind and spirit. If all else fails, you have a strong foundation to survive. As for the ‘how to’ of investing itself, I have learned ten basic principles through my own school of hard knocks. One learns a lot about themselves through trial and error and some of the principles I learned I apply in my personal life as well providing a blueprint of sorts rather than an ad hoc unplanned approach.

1) Know your own personality disposition. Would you prefer dealing with people which is a requisite for being a hands on landlord, or are you less a people person and more oriented toward mathematical modeling,charts and deciphering economic tea leaves studying and mastering financial market trends? Also real estate is more
buy and hold and illiquid as the longer term investment vs. stocks which may fit someone more inclined to seek speedier gratification. Some manage to do both. I have done both but get more enjoyment from the latter.

2)The old axiom ‘buy low, sell high.’ Now is a better time to buy real estate than when it was going sky high prior to 2006. If you avoid rushing to buy when everyone else is doing the same thing, you will be a contrarian investor which is often the best place to be. Ron Paul was buying gold when it wasn’t yet fully on the radar, and he has done very well.

3)Avoid automatically buying the hype professionals may give instead relying on your own research and assessments. No one will be better at managing risk than you if you stay informed and involved. If someone is trying to sell you something and they are making commissions or fees from that, they may not disclose to you everything you need to know. Research and verify everything someone tells you. Try not to stay locked into any kind of advisory situation where you feel obligated to deal with just one person. I am upfront about telling anyone I use (real estate broker, stock broker, certified financial planner etc.) it is my style not to rely on any one person, and I like to make my own decisions. This gives me flexibility to do what I want, the ability to cross check information, and a ‘try harder’ effort from them knowing they are competing for my business.

4) Have patience. Generally you get a second chance. If you miss an opportunity, don’t sit around and fret as you will get another chance. Nothing ascends upward forever as we have witnessed with real estate. Gold has been in a correction and consolidation mode for over a year. Sitting and waiting something out is sometimes better than acting upon the compulsion that you must do something right away.

5)Stay disciplined. Try to set profit goals, and don’t get greedy. The best stock traders set their goals and sell when their targets are reached instead of waiting for the price to go to the moon; setting sell stops and cutting losses keeps you from holding onto losers. Doing this helps build a cushion insulating you from devastating losses that are hard to recover.

6) Consider your age and accompanying risk exposure. I am amazed at the level of risk some of my friends take on. If you lose $1,000 in stocks, you have to make that up with a 100% return just to break even. That is a taller order than many appreciate. At 20 years of age, you have more years to make up a $1,000 loss than if you are 40 or 60 years old or retired.

7) Dollar cost average. Spread your investments out on some kind of regular schedule, monthly, bi-monthly, quarterly etc.; avoiding going full hog all at once saves the heartache of buying at the wrong time. Having a frugal mindset via saving and less spending encourages you to also exercise prudence in what you buy and when you buy it.

8) Don’t fall so in love with something, you can’t sell it. Anyone who bought gold at $600, sold it at $1900 and bought back again at $1500 is cutting his risk to a $200 loss vs. $600. The smartest pros take their profits when they can (as in point 5) and don’t get
so enamored or locked into something, they can’t see pitfalls coming.

9) Luck and timing may reward you or do the opposite, but if you don’t take anything for granted and work hard to refine your own investment skills, you can take great satisfaction in learning about yourself and growing in the process. I got out of day trading after 5 years right before the dot.com bubble burst, and that was sheer luck. However, the charting skills I had acquired came in handy later when hedge fund managers started to affect market swings and an investor had to know technical skills to cope with the volatility.

10) Diversify and don’t put all your eggs into one basket and always keep enough cash available to buy something when the ‘buy low’ opportunity arises. (#7 will help keep funds available).

People who eschew any or all of the above tend to leave the responsibility to someone else (their stock broker, certified financial planner etc.). The more responsibility you can accept, the higher your personal reward will be that you are in control of your life and your future at a time when so much uncertainty threatens to upset our lives and our apple carts.

There are all kinds of projections out there on gold and silver. I check the www.kitco.com site daily for prices and articles.
Good luck on your new adventures and investment challenges! I hope it is as exciting and fun as what I experienced.