School of Hard Knocks 02 (Jan 10 - Jan 13)

[winston]

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Mistake No. 3: Allowing yourself to be bullied by good salespeople.

I mentioned that early in my real estate career, I made some bad investments. Those were due to a combination of the two mistakes I just enumerated, plus I buckled under pressure from a real estate broker who also happened to be my landlord and, I thought, a friend.

I agreed to make the investments even though I had a hunch they wouldn't work out. I ignored my instincts because she was so good at manipulating me emotionally.

Nowadays, whenever someone tries hard to sell me something, I take that hard selling to be a signal: stay away!

[winston]

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Mistake No. 4: Investing in trends too late – when the only chance of making money is to find "the bigger fool."

I got into real estate investing at a good time, when prices were already going up but also when the values were still very good. I made a lot of money as the market rose, but when I could no longer buy properties at eight or 10 times yearly rental… I realized the only way to profit was to ride the bubble to the top.

But riding a bubble when the economics are bad is a fool's game. Your only chance of winning is to find someone else willing to buy you out, who knows less about the market than you do.

Insiders call this "the bigger fool theory." You would think anybody with common sense would not fall victim to this impulse, but millions of Americans (including bankers and brokers) did.

There is a time to get into a trend and a time to get out. Neither is that difficult, so long as you pay attention to the fundamental economics of the deal and ignore the excitement caused by the bubble.

[winston]

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Mistake No. 5: Investing without a way to limit your losses.

Sometimes, even if you use your common sense and avoid the four mistakes I've already explained, you can lose money because something entirely unpredictable happens.

To avoid this, I have a rule that I never get into an investment unless I have a way out.

When you are investing in a business deal, that way out might be a buy/sell agreement. When you are investing in real estate, it is the income you can get from renting it if you can't sell it for any reason. When you are investing in stocks for yearly gains or income, it is the trailing stop loss.

There is always a way to limit your downside – so long as you identify what that is before you make the investment and stick to it, even if you feel like you shouldn't.

So those are the five biggest mistakes ordinary investors make. As you can see, they are all pretty obvious – the kind of mistakes that you can avoid by applying common sense. Avoiding these mistakes is part of how I've managed to get richer, year after year.

Think about your own investment experiences and the investments you are making right now… and ask yourself honestly: "Am I making any of these five common mistakes?"


Source: Daily Wealth

[winston]

TOL:-

Are you really that smart to be able to spot an opportunity, where hundreds of other people including full-time analysts, have also analysed the same situation ?

What edge do you really have over them ?

And at the same time, what information have you missed ?

TOL 2:-

Why is somebody buying when you are selling and vice versa? Who has more information ? You or the guy on the opposite side of your trade ?

With a lot of retail investors not returning to the markets, is your info really that good ?

If you are using FA, is your Analysis that great, when there are hundreds of other full-time analysts and traders, analyzing the same situation?

And even if you are able to seize things up properly, the guys on the inside or their friends have already front-run you.

This also includes the Fund Managers who have visited them before their earnings announcement and have made a judgement on whether the results would be below or above expectation. So what edge do you really have ?

If you are using TA, what else can u see on the chart that other TA "experts" cannot see ?

If you are using "CANSLIM", what has other "CANSLIM" followers missed ?

Why do you think that you have an edge over others ? What really is your edge ?

Are you confusing your luck as skill ?

[winston]

Learning from failure

You've failed many times, although you don't remember.

You fell down the first time you tried to walk.

You almost drowned the first time you tried to swim. . . .

Don't worry about failure. . . . Worry about the chances you miss when you don't even try.

-- Sherman Finesilver, US District Court Judge

[winston]

"No matter what it is, pick yourself up and go on to the next project."

-- Shelley Duvall, actress

[winston]

"Some of us learn from other people's mistakes and the rest of us have to be other people."

-- Zig Ziglar

[winston]

"In order for you to profit from your mistakes, you have to get out and make some."

-- Anonymous

[winston]

We learn wisdom from failure, much more than success. We often discover what we will do, by finding out what we will not do.
- Samuel Smiles, 1812-1904


Experience is a grindstone; and it is lucky for us, if we can get brightened by it, and not ground.
- Josh Billings, 1818-1885

[winston]

TOL:-

So many "experts" giving their advice on what QE3 means, as if they can really see the future.

The louder these guys speak and the more convinced that they think they are right, the less likely that I will be listening to them.

To me a "true" expert, is one who's flexible...

He will have a "most likely" scenario but is smart enough to say that he's wrong when his "most likely" scenario does not materialize.