Individual investors are perpetually searching for the investment philosophy that’ll bring them the wealth and independence they believe they so rightly deserve. Should I buy low, sell high; or should I buy and hold? What’s the best strategy to make money, preserve my capital, how do I avoid going on full tilt?
Well, I’m going to tell you that ALL the strategies are full of bunk. All investment strategies are full of bunk because the underlying assumption is that you can consistently beat or time the market if you follow that strategy. Why else would you adopt a strategy in the first place unless you believed you could beat the market? Winning is the name of the game, right? And to win, you must have a plan. A man, or woman, without a plan is not a man, right?
Sure, there are fellers that beat the market and make fortunes. There are also guys that make it to The Show (that’s baseball lingo for the Major Leagues). But they are so few and far between, why would anyone think there’s a strategy out there that will afford anyone the opportunity to achieve this kind of success. The fact is that there is no such strategy. It’s just that some people are blessed, or have the capacity to develop extraordinary capabilities that allow them through hard work and dedication to achieve the pinnacles of success. And once in a while a person can get lucky and win the lottery too. But the average Joe is just not going to reach the top, no matter what the strategy.
Well, why can’t everyone be a winner? Everyone can’t be a winner on these terms because if everyone was a winner, the definition of winner would no longer have any value or meaning. Besides, it really comes down to how you define winner, and what it means to win. So, your investment strategy should have a goal, but I don’t think it should be winning. Because if it is, you may never achieve that goal. And what good is it to have goals that you may never achieve.
Now, I want to make something perfectly clear. I’m not saying that you can’t achieve fantastic wealth and independence. And I’m not saying that you shouldn’t set lofty goals, or lower your expectations, or just strive for mediocrity. On the contrary. What I’m saying is you must redefine, the goals that your trying to achieve, and thus your strategy should really be a philosophy that guides your actions.
You see, the reality is that even if you achieve the pinnacle of success, if that success doesn’t make you happy, can you truly consider yourself a winner? Now we’re getting down to the nut. The philosophy for successful investing is the same philosophy for any pursuit in life. And that is, the act of investing itself should bring you joy, fulfillment, and happiness, whether you are in the black or in the red.
I would compare this to going to the casino. Most people go to the casino with the hopes of winning, and many of us prepare for the casino games the best we can to give us the best chance possible to come home with more than we left with. But the real joy of going to the casino is the action, the lights, the shows, the girls. Did I say action? And sure it feels better to come home with a big wad of cash, but if you come home with nothing, then you lost only what you felt was an appropriate amount to lose and still have a good time, so then either way, you’re a winner. If it’s any other conclusion, then you have a gambling problem, perhaps an obsession that needs professional attention.
So, with this preamble, here’s Zach Bass’ philosophy for successful investing. Invest only what you can afford to lose and have fun investing. Educate yourself to the hilt. People ask me how much should I know before I even start investing. Well the answer to that is you need to know everything, and with that standard you should never start and you’ll probably be way ahead of the average investor. But that’s obviously not the answer you want to hear, because you want to invest, and you want to have fun, and having fun means enjoying successes. The thing is, without the education, you’ll be hard pressed to enjoy consistent winning trades.
Education is the most important aspect of investing, and so you should have fun educating yourself. Besides, having fun and enjoying the action is the real goal, so arm yourself with as much knowledge as you can, then ask the following questions to determine if you were a winner: Do I feel good about the effort I put into that investment? Did I enjoy the process of educating myself for that investment? Did the results of the investment meet within the range of expectation I set for myself? If you answer in the affirmative for each of these questions then your investment experience was a success.
Here are some bullet points that should make your investing fun and successful:
- Only invest what you can afford to lose, some reasonable percentage of your total net-worth, based on your risk tolerance. This is your speculative account. For me that percentage is 20 percent, for some it will be more, others less.
- Diversify all other assets into long-term investments like index funds, bonds, real estate, etc., if you are employed by another, take full advantage of their retirement vehicles, if self employed, contribute at least double the maximum.
- Pick an industry and/or company that you find great interest in and learn everything there is to know about that industry/company, stay current. Continuously search out great resources.
- Learn everything there is to know about investing; the markets, technical analysis, corporate balance sheets, fundamentals, strategies of the successful, etc. It is important that you enjoy this part. If it’s a drag or you suck at it, you’re better off stuffing your money in a diversified mix of EFTs and Index Funds and forget about it, you’ll do OK that way.
- Do not let your speculative investing activities contribute stress to your life. This actually goes for just about any activity or endeavor you pursue. Life is short, and you only got one shot at it, have as much fun with as little stress as possible.