Friday, August 18, 2006

We Will All Be Wrong - Frequently

If you don't like the implications of the above title - don't invest.

The first requirement of successful wealth creation is to realize it is far easier to lose money than to make money.

Those not infrequent times when it becomes easy to make money are short lived and dangerous. Four letter stocks in 1998 and 1999, housing in 1981 or 2004, perhaps commodities in 2010 or 2012.

Make your bundle - but keep taking chips off the table. When the run ends it is likely the chips you removed from the main game are all you will retain.

Look to the next market that will move and put in a few of those chips too early.

"When I've heard all I need to make a decision, I don't take a vote.
I make a decision." - Ronald Reagan

Hedge your bets - you will be wrong more often than you will be right. Even if you guess right better than fifty percent of the time - you have to be right on several investing components, price, time, size of move, etc to win. Being wrong on just one can cause you to lose.

That is why we have speculation rules like cut your losses short and let your profits run. It is the guideline of rules that keep our money growing.

When money is laying on the ground - pick it up. You should be aware though that there is a time limit and if you overstay your grabbing at dollars you may lose them all.

Frequently we keep more if we want less.


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