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

[winston]

"Failure is not in your vocabulary; rather, you convert all working experiences, be they positive or negative, into fuel for future success."

- Anonymous

[winston]

"There are some things you can't learn from others. You have to pass through the fire."

- Norman Vicent Peale

[winston]

"A smooth sea never made a skillful mariner."

-- English proverb

[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 ?

[iam802]

Our edge is 'we do not analyse-till-paralyse and we take action.'

[winston]

Our edge is 'we do not analyse-till-paralyse and we take action.'

Hmmm .... I always tend to believe that I'm right and the market is wrong .

And I forget to ask:
1 Why is somebody selling to me when I'm buying and vice-versa ?
2. Who has better information ? You or the market, especially when the market is now dominated by a lot of short term traders

[winston]

You must acknowledge the consequences of your mistakes.

You must convince yourself that these consequences are dire while ranking the benefits from the right decisions as so worthwhile, that it makes you stop cheating.

That's how you change your patterns and improve in any area of life.

- Craig Ballantyne

[winston]

Grow Your Wealth for Decades without a Single Losing Year By Mark Ford

Maybe I'm lucky. Or maybe it's just common sense.

I've been involved in the investment advisory business for 30 years. And except for a few early mistakes buying real estate, the big financial hoaxes and bubbles that devastated so many investors never burned me.

That made a huge difference over time. It allowed me to grow my net worth year after year without a single year of loss.

In this essay, I want to identify several lessons I learned and how to avoid the biggest mistakes average investors make.

The financial life of the typical investor is marked by a plethora of hopeful speculations. Only a few dozen, at best, achieve their promise. My investment history is less exciting but more profitable.

I get into trends only after they are proven, I get out as soon as they don't make sense, and I turn my back on nine out of 10 opportunities that come my way.

For example, in the 1980s, penny stocks were the rage. The financial press was full of stories about investors who got rich by buying little-known companies at $0.50 a share. My boss invested in one and tried to convince me to do the same. I was tempted. But something inside of me told me to let this bus pass me by.

I'm glad I did. My boss, a very savvy investor, lost 100% of his money on that deal. It turned out to be a scam. I remember thinking that if a sophisticated investor can be fooled by one of these cheap stock deals, I'd stand no chance.

Or take the recent real-estate bubble. By that time, I had been investing in real estate for more than 10 years. I knew the game. I had made a lot of money.

But by 2006, the houses I had been buying were selling for 20 times their yearly rentals. I knew it was time to get out. I stopped buying and advised my friends to do the same. They thought I was crazy. I'm sure they wish they had listened to me now.

I'm telling you these stories not to brag, but to illustrate an important point: You don't have to be a sophisticated investor to avoid making big investment mistakes. You can do so by applying a little bit of common sense.

What follows is a list of the five biggest mistakes most ordinary investors make:

[winston]

continue ...

Mistake No. 1: Being swept away by exciting stories.

The business my boss got suckered into had an amazing story. A company in Central America was turning beach sand into gold.

The company had "proof" of their success in the form of audited financial statements, geologist reports, and endorsements from investment experts. My partner even went down and saw the operation. He saw the sand going in and the gold dust coming out.

I didn't invest because the story sounded so fantastic. I remember telling him, "This sounds like alchemy." I didn't know anything about geology or gold, but I didn't need to.

The story itself was just too crazy. When I hear stories like that nowadays, I am totally turned off. One part of my brain might get excited, but the smarter part tells me, "Stay clear!"

[winston]

continue ...

Mistake No. 2: Investing in businesses you don't understand.

My boss was a sophisticated investor. He had his own seat on the stock exchange when he was in his twenties and had been successfully investing since that time. But he knew nothing about gold mining. Nothing at all.

His ignorance allowed him to be duped by the reports and by the fraudulent factory tour. The scam was exposed by a few people who were in the mining business. They understood the industry and they knew how to read reports with the sophistication of experience.

If you don't understand the business you are investing in, then you are investing blind.