Investing for Survival

 Investing for Survival

Smart money is slow money. If a stockbroker or financial planner tells you that you’ll miss a huge opportunity if you don’t buy right now, ignore them. A smart investor moves at his or her own pace.

To make sure that you don’t get pressured into buying something, it’s nearly always a good rule to avoid salespeople. Stockbrokers, financial planners, mutual fund salespeople and even the experts on the television all have financial incentives that can pull them in directions opposite to what’s in your best interest. Before buying any stock or any financial product, you should do a bit of background reading so that you understand what you’re buying and how much rival products cost. In many cases—insurance is a good example—you’ll find that the simplest product is your best buy. Complexity in insurance, and many other investments, is usually a cover for increased fees.

Especially when it comes to buying stocks, patience is your best friend. If an idea seems like a sure thing, sit on it for a month.  If the idea is still a good one, you will usually still have time to act on it.  If the idea is a bad one, the extra time will help you do further research and may make its problems evident.

One of the best ways to make money is to avoid losing it. When I approach new ideas, I try to ask how likely it is that I will lose money, and how much I could lose if I am wrong. I lose about 20% of the time. Six times in the last 15 years, I have lost half my money on an investment. Those are actually pretty good numbers. I can’t avoid all losses, but if I wait, take my time and do my research, I can limit my losses, and make money on the rest of my ideas.