Tune Out the Noise

Beloved, I pray that you may prosper in all things and be in health, just as your soul prospers. (3 John 1:2 World English Bible)

In my new book “How to Be A Great Investor: Investment Techniques For Christians”, I offer several principles on how to improve your skills as an investor. After working on Wall Street for 35 years, I have the experience to guide you through the investment world.

For instance, be careful when it comes to whom you listen to for advice. Financial journalists, talking heads, and TV pundits provide entertainment value—nothing more. Never, ever, take advice from someone who doesn’t have to live with the consequences!

Next, you must think independently and differently; otherwise you’ll end up like everyone else—a mediocre or poor investor. In order for you to become a great investor, you must learn to ignore the fashionable nonsense and tune out the noise.

Thirdly, and one of the biggest points to take away from my book is that your success or failure in the stock market, or any other investment for that matter, is directly proportional to the price you pay. If you overpay for your stock, it might take years to make a profit. If you buy your stock on sale at a deep discount, you have potentially less downside risk and more upside probability.

Yahoo shares make a great example. If you bought Yahoo in January of 2000, you paid a hefty $237 per share. Fifteen months later, Yahoo was trading at $11, a 95% decline—ouch!! It might take a couple of lifetimes to break even on this not-so fortuitous trade. If, on the other hand, you purchased Yahoo when it was trading at $11, you would have had a 600% gain in less that five years! Same stock, different price, completely different outcome.

What is smart at one price is dumb at another.  –Warren Buffett

Put bluntly, buying securities at extraordinarily high prices is economic suicide.

Fourthly, “hope” is not an investment strategy. The stock market doesn’t care what you think or how you feel. You can’t just buy a stock because your plumber mentioned it in passing and then hope it goes up while you watch it go down the drain. The investment world does not always conform to our expectations, desires, hopes or thoughts. Unfortunately, even good investment decisions can still lead to bad outcomes in an unknown world.

Risk is inevitable. All investments have some sort of risk. For instance, bonds have default and interest-rate risks, just as foreign stocks carry currency and political risks, and REITs have vacancy risks. CDs, although relatively safe, aren’t risk free either. Penalties for early withdrawal, not to mention, inflation, and taxes which can erode your savings in a hurry. Companies go out of business or file for bankruptcy all the time; Lehman Brothers, General Motors, Toys R Us, and Enron are well-known examples. Anyone who owned shares in these companies lost money, a lot of money.

It’s impossible not to lose money in the stock market at some point in time. No one bats a thousand. Even the best money managers make mistakes. Except, of course, Bernie Madoff, who never had a down year. However, he is no longer in the investment business; he is serving a 150-year prison sentence for fraud.

My book contains dozens of financial principles to help you become a better investor. Take advantage of them, learn from them, and profit from them.

Here’s a final principle before I close. The stock market has recovered from and moved on to new highs after every depression, recession, correction, and bear market. Remember this the next time the stock market takes a dive. Invest for the long term and ignore short-term fluctuations.

You can order a copy of “How to Be a Great Investor” on Amazon.

Don’t forget to take advantage of the FREE financial resources on GreatInvestor.org.  It’s the only website dedicated to helping Christians learn the art of investing. You can email me your financial questions at info@greatinvestor.org. I’m happy to help you if I can.

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Warren Buffett said it best:

The market, like the Lord, helps those who help themselves, but unlike the Lord, the market does not forgive those who know not what they do.

Thanks and Blessings!