Know Thyself

Beloved, I Pray That You May Prosper In All Things And Be In Good Health -3 John vs. 2

Here’s a very important question-who should invest in stocks? The answer is, it depends; it depends on many factors. Good investors need to know why they are investing. Is it for growth, income, growth and income, preservation of capital? How long (time horizon) will you be investing? One year, ten years, a lifetime? Are you able to withstand market declines of 20%, 30% or more? As an investor, you must "know thyself” before putting your hard-earned money into the stock market.

The begining of wisdom is achieving an accurate picture of yourself. Will you bail out if the market plummets? Investing in the stock market is not for everyone. To be a good investor, you must be patient, disciplined and able to completely remove emotion from the equation. Fortunately, my ancestors came from England. English people are quite stoic. We lack a great deal of emotion, which perfectly suits me as an investor.

Too many people buy high and sell low. They get greedy and buy hot stocks only to get burned. Good investors know stock market declines are inevitable and see them as buying opportunities. Take one of the credit reporting agencies for example. You may recall a massive data breach in 2017. It was estimated that as many as 150 million consumers had been affected. As you might imagine, this adverse event had a devastating impact on the price of the stock. Trading at around $140 a share prior to the bad news going public, it quickly sank to $93. A 33% decline in just a couple of weeks. If you recognized this as a buying opportunity, as I did, you could have made $25 a share in just 8 weeks, a 25% gain. Buy low. Sell high. Put another way, a crisis is a terrible thing to waste. Unfortunately, the stock market is the only place where things go on sale, and the customers run away. For reasons just mentioned, I am an opportunist. I have made money on several such trades in my career.

The best thing that happens to us is when a great company gets into temporary trouble—we want to buy them when they are on the operating table. —Warren Buffett

So, is the stock market the right place for you to invest. Only you can answer that question. Do you want to eat well or sleep well?

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Thank you. Many blessings to you and yours.