Rules of investing.
The first rule of investing is: Don’t lose your capital. And the second rule is: Only take on risk when the odds are stacked in your favor so that you have a good chance of making money.
If you lose 50% of your capital you need a 100% gain on the remaining capital to break even. 100% gains are very hard to come by.
Every successful investor understands the secret to investing success is good risk management, something very few investors are good at.
The facts show that 95% of stock market investors lose money over a complete business cycle. Of the small percentage that are successful, they will all tell you the ability to manage risk is the most important quality an investor must have. The facts show average investors, the 95%, buy near tops and sell near bottoms where the risks are greatest and losses all but guaranteed.
Today, investors are taking on extraordinary risks (near the top) for very little potential gain; whether it is in stocks, the bond market, real estate, or even precious metals and commodities. In other words, investors are doing the exact opposite of what they should be doing.
Easier to make than keep.
As they say “it’s a lot easier to make money than it is to keep it”. And there’s a simple reason for this – people accumulate wealth because they’ve developed expertise in a particular field or business, but the problem comes about when they have to figure out what to do with their hard earned wealth.
There was a time you could put your money in savings, earning a reasonable return, and feel your money was safe. But with interest rates near zero, it has forced otherwise conservative investors to put their money into much riskier investments that they know little or nothing about. Now everyone needs a wealth manager, and maybe even more than one, and that’s where investing becomes even riskier.
We don’t know what we don’t know.
We all are much too quick to accept someone else as some kind of expert because they sound like they know what they’re talking about.
You wouldn’t hire a car salesman to build you a race car, would you? I know I wouldn’t. And why is that? Well, that car salesman can talk a great game about what’s under the hood and what makes a car special, but if I ask him to put one together he’d think I was crazy! But that’s what we’re doing when we hire a broker or financial planner. They may sound like they know what they’re talking about, but just like the car salesman, the only thing they know is how to make money selling you financial products, not how to make you money.
With the risks far greater than at any other time in our lives you can’t afford to be listening to the wrong people. Not only is your wealth at risk, but so is your family’s health and safety.
Here’s who I’ve closely listened to as a paid subscriber for over 20 years, and why you should to:
Elliott Wave International is the world’s largest independent financial and social forecasting firm.
For over 40 years, Elliottwave International subscribers have trusted them to guide them through economic, financial and social uncertainty.
I’m not putting that 1/5/22 call here to show off how great the call was. (Which it was. Just look at what’s happened since then.)
No, I’m showing it to you to emphasize that it says, implicitly: We are just getting going.
There is so much more to come from this massive bear market.
It’s not too late to prepare
Now, smart people are asking, “How can I get safe, fast?”
Must watch (14 min)
Safety: That’s the Name of the Game – Camano Safe Future Group