Archive for the 'Motivation' Category

Are you complaining? Then stop.

A lot of today’s population is made up of people who have gone to school, got a job and show up for work each day like they were told they were supposed to do. Many people have aspirations of doing more and making more but never reach the heights they desire. Many of these people even make a habit of complaining about “the rich” or “the man” keeping them from getting their due.

Its no secret that today’s world is a world of debt and a population that has come to expect their right to a job and a steady paycheck and insurance benefits. My belief is that 40 hours of work and saving whatever you can is simply not going to be enough in the coming years. Only those who take control of their own financial destination are going to live the way they truly want. Ben Stein, the actor/economist, has written an excellent column (registration required) for the NY Times on how to get your piece of the pie. In the column he says,

You are always better off working in a field where torrents of money are sloshing through and you can grab a handful as it goes by. That means Wall Street. Finance is the ultimate great business. (Warren E. Buffett famously said that you are always better off being mediocre in a great business than great in a mediocre business, and he easily could have been talking about Wall Street.)

Even if you’ll never have a Wall Street job, you can see why it important to take control of your own finances and investments. You can invest a little now to gain a lot later, but you have to be ready to take your share when the money comes passing by.

Mentally taking the risk

One of the good things about the Big Moat concept of investing is that once you do your research on a company, running the numbers and executing buy/sell orders using the tools takes a lot of the “thinking” out of investing. I imagine this is why Big Moat investing appeals to a lot of people who might not have traded in the stock market before or to people who may have not done so well with their investing in the past. The Big Moat concept works especially well in the minds of new investors when their first few trades go well, some people may even get the feeling that they can’t lose, and that’s a great feeling.

The problem arises when the first loss does roll around, and it will. There’s just no avoiding it. Hopefully it won’t be a big loss or, lord forbid, a overnight gap down like we saw with Chico’s as few weeks back. This one losing trade may be enough for many people to take all of their money out of the market and throw their hands up and scream that it doesn’t work. So what do you do to avoid this happening to you? In a post today, Brett Steenbarger offers a solution that is simple in its concept but will be difficult to actually follow. If his idea is something you can instill in yourself, it will allow you to become a better investor. His concept is to accept that you will lose money on the trade you’re about to execute. By making the loss the expected event, a winning trade will have much more significance which is the way it should be. If you’re expecting the loss and the trade is in fact a loss, then you got what you expected – no harm/no foul, just move on to the next trade when the tools show its time to buy.

200 million reasons not to trade against the trend

Last week was interesting in that I was sitting in a tire store to have a tire replaced on my car and I met someone who had an interesting rags to riches story. He was a general contractor who ended up broke and lost his homebuilding business because he couldn’t pay his creditors. Once this happened, many banks wouldn’t even open a checking account for him so he opened an account with an online broker with checkwriting privileges. After opening this account he started researching stock trading and purchasing options. After paper trading for six months, he began trading options. He’s now in his 40’s, semi-retired and was in the tire store to have new tires put on his car that he was giving to a single mother.

The most interesting thing from our conversation is the very first thing he told me when I asked him what strategy he used. His response was, “the trend is your friend“.

Apparently professional investors don’t remember this rule all the time either as this article from points out. It says:

…MotherRock, a two-year-old fund that once had nearly $450 million in assets, shut its doors in late July after losing nearly half of its value. Led by former New York Mercantile Exchange President J. Robert “Bo” Collins, MotherRock also bet wrong on natural gas prices.

…MotherRock got caught betting that natural gas would fall at a time that the commodity was soaring to new heights. The irony is that if MotherRock could have held on for another few months, it might have recovered much of its losses.

Will this be you?

From Hugh Macleod’s