Fear Not

The investor’s chief problem—and even his worst enemy—is likely to be himself. –Benjamin Graham, author of “The Intelligent Investor”

If you are not doing well as in investor, it might be that you’re the culprit. My primary reason for writing this newsletter is to help you minimize any future regrets.

More and more studies are confirming the obvious, that most individual investors act irrationally. The problem is they don’t know they are irrational. When the average investor gets clobbered in the stock market, they tend to blame it on somebody or something else. “My barber said it was a sure thing.” “I didn’t know the FED was going to raise interest rates.” “How was I supposed to know Toys “R” Us was going to file for bankruptcy?” The finger of blame almost always points elsewhere. Investors must hold themselves accountable for their investment decisions.

I have seen so many people make the poor stock selections over my career. I’ve seen people buy shares in a “chicken ranch” (brothel) in Nevada; penny stocks in an Angola gold mine; and GM just a week before it filed for bankruptcy because it was “too big to fail.” Nonsense. This last guy was watching too much CNBC. I warned this young chap that no company was too big to fail, and it made perfect sense for GM to file for Chapter 11 due to costly pension and other long-term retirement obligations.

Sure enough, despite my warning, he bought several hundred shares of GM and sure enough, a week later, they went bust and he lost his shirt. Meanwhile, the alternative I recommended to him worked out quite nicely, thank you. More often than not, we are our own worst enemies.

I can calculate the motion of bodies, but not the madness of people. –Sir Isaac Newton

Fear and greed are two of the most dangerous traits to have as an investor.

Jesus warns us to, “Watch out! Be on your guard against all kinds of greed.” Greed can help you lose your money in a hurry. Fear, on the other hand, can keep you from making money when opportunities arise.

I am reminded of a conversation I had with a couple of pastor friends of mine back in 2009. They wanted to know what I thought the market was going to do. As if I had access to some sort of psychic hotline. Remember, the S&P 500 was down 37% in 2008.

I told them I thought the market had probably hit bottom, and it might be a good time to buy. Their response was perplexing. “Are you nuts?” they asked. They then began to rattle off a list of everything that was wrong with our economy and the stock market.

Fear kept them out of the market. They ended up wasting a golden opportunity (buying low) to make a lot of money. Since my conversation with these gentlemen, the S&P 500 is up over 200%! This is a truly rewarding experience for this author and his family. Not so much for my two friends. The important thing to remember is that the stock market has recovered and moved on to new highs after each and every crash, correction, recession and crisis. Never forget the importance of that statement. These temporary downturns can be terrific buying opportunities.

Look at market fluctuations as your friend rather than your enemy. Profit from folly rather than participate in it. –Warren Buffett

Remember your success, or lack thereof, is directly correlated to the price you pay. The lower the price you pay for a quality asset, the higher the upside potential and the lower the downside risk. Got it? It never ceases to amaze me why most Americans will not buy stocks and bonds when they go on sale.

Waiting for the stock market to recover before investing makes absolutely no sense. Why pay full price when you can buy at a discount? Sad to say, just about everyone I know does not act rationally when it comes to investing.

The Bible also tells us at least 80 times to Fear Not. It is great advice for investing and living life to its fullest.

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Thanks and Blessings!