What is the significance of this picture? It's an insect killing device that attracts bugs through a
blue light. They like a specific wavelength, fly towards it, and get electrocuted.
It's a rainy day today, if I turn off the light for a few minutes-- lots of flying termites get zapped. What the hell does this have to do with a financial or investment blog?
Don't be greedy. I liken the stock market to that blue light. You get sucked in by greed and get zapped and you start from 0 again. If you traded on margins... Lots of luck....
The point is to maintain austerity in good times. Keep cash. Try to preserve money before the whole thing collapses.
I was reading a biography of Barnard Baruch. He had 10 great tips:
“Being so skeptical about the usefulness of advice, I have been reluctant to lay down any ‘rules’ or guidelines on how to invest or speculate wisely. Still, there are a number of things I have learned from my own experience which might be worth listing for those who are able to muster the necessary self-discipline:”
1. Don’t speculate unless you can make it a full-time job.
2. Beware of barbers, beauticians, waiters — of anyone — bringing gifts of “inside” information or “tips.” “When beggars and shoeshine boys, barbers and beauticians can tell you how to get rich it is time to remind yourself that there is no more dangerous illusion than the belief that one can get something for nothing.”
The longer I operated in Wall Street the more distrustful I became of tips and ‘inside’ information of every kind. Given time, I believe that inside information can break the Bank of England or the United States Treasury. A man with no special pipeline of information will study the economic facts of a situation and will act coldly on that basis. Give the same man inside information and he feels himself so much smarter than other people that he will disregard the most evident facts.”
3. Before you buy a security, find out everything you can about the company, its management and competitors, its earnings and possibilities for growth.
“In the search for facts I learned that one had to be as Un-impassioned as a surgeon. And if one had the facts right, one could stand with confidence against the will or whims of those who were supposed to know best.”
“Mankind has always sought to substitute energy for reason, as if running faster will give one a better sense of direction.”
4. Don’t try to buy at the bottom and sell at the top. This can’t be done — except by liars. Bears can make money only if the bulls push up stocks to where they are overpriced and unsound.” “Whatever men attempt, they seem driven to overdo. When hopes are soaring, I always repeat to myself that two and two still make four.” “The main purpose of the stock market was to make fools of as many people as possible.”
5. Learn how to take your losses quickly and cleanly. Don’t expect to be right all the time. If you have made a mistake, cut your losses as quickly as possible. “In the stock market one quickly learns how important it is to act swiftly.”
6. Don’t buy too many different securities. Better have only a few investments which can be watched. Don’t try to be a jack of all investments. Stick to the field you know best.
7. Make a periodic reappraisal of all your investments to see whether changing developments have altered their prospects.
8. Study your tax position to know when you can sell to greatest advantage.
9. Always keep a good part of your capital in a cash reserve. Never invest all your funds.
10. “Nobody ever lost money taking a profit.” “It is one thing to make money and another thing to keep it. In fact, making money is often easier than keeping it.”
11. “The wisest course is to sell to the point where one stops worrying.” “Learn how to take your losses quickly and cleanly. Don’t expect to be right all the time. If you have made a mistake, cut your losses as quickly as possible.”
12. I think economists as rule…take for granted they know a lot of things. If they really knew so much, they would have all the money and we would have none.
13. And I am not for any fellow that runs any great rackets because he has made a lot of money… Money making is not all there is. The fellow with the most money is not the man we have to look up to.
14. I never knew an amateur to make any money in speculation. I have know professional to. And in all these things were you require peculiar training — it is like anything else. Whether you are an economist or a lawyer or something else, you have to make a specialty of it and devote all your time and thought to it. If you do one thing you might do it well. If you try to do two things, you are likely to do both of them badly.
I have nothing else to add to Baruch's comments.
https://investoramnesia.com/
This is a great site on financial history.
Really good articles giving examples from the past.
Diversification does not eliminate risk. If the underlying asset drops in value or production, so will the portfolio.
https://investoramnesia.com/
This is a great site on financial history.
Really good articles giving examples from the past.
Diversification does not eliminate risk. If the underlying asset drops in value or production, so will the portfolio.
That's all folks!
Sources (I'm not smart enough to think this up all by myself!) --
Stock Market Study – Hearings Before the Committee on Banking and Currency, United States Senate, Eighty-Fourth Congress, First Session on Factors Affecting the Buying and Selling of Equity Securities, March 1955
https://thereformedbroker.com/2013/02/17/bernard-baruchs-10-rules-of-investing/
"Baruch - My Own Story" Published by Henry Holt & Co., 1958.
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