The First Principle in Successful Investing is: Don’t lose money.
If you have a difficult time paying off your debt, putting aside money in a saving’s account, or investing on your own, you are not alone. More people than you know face these challenges. Some of them never escape them and only a small number found the investment information that transformed their thinking and put them on a path to investing with success.
The best investors in the world use strategies to invest with certainty. Investors like Charlie Monger, Warren Buffett, and Benjamin Graham. These men and others who have emulated their approach have mastered the strategies to successful investing which they strongly believe can be done by most people. For these men, investing is not a guessing game; it is not akin to gambling – making a trade and praying that it turns out right. Nor do they spread out their investment funds among several stocks hoping that some would bring a profit.
When Buffet says never lose money, what exactly is he saying? Is he saying that none of the stock that he purchases never saw a loss? Is he saying that he has a failsafe formula that he applies to his stock purchases that protects his investments from all adverse downturns? To understand what Buffett means, one must understand how Buffett does investing.
Unlike many investors, Buffett sees an investment as getting a piece of a business and its cash potential for future years. He begins by focusing on what could go wrong with a stock. What is the risk that the business could fail and that he could lose all of his capital. If there is a chance that the company of interest might fail, Buffett will not invest in that company. There is no guessing as to what will happen. The power of knowledge guides his decision and hence the idea of “never lose money”. How does this differ from your ideas of investing?
One of my newest mentors and financial tutors is Phil Town. Phil is investor who has a good grasp of Buffett’s notion of “never lose money”. His entire concept of investing is grounding in that idea which he teaches to students across the US and Canada, as far as I know. I am one of his students. Phil believes that investing should not be an exercise that ties you to a computer for the most part of the waking day. In fact, he believes that it should not require more than 15 minutes a week to be a successful investor. Phil demonstrates how this is not only and idea but a proven fact that is rooted in solid information.
Anyone who wishes to retire comfortably, with, say $500,000, need to begin to think about what it would take to do so. In actuality, $500,000 is not a lot of money in today’s expensive world. I am not saying this to scare anyone or to pour cold water on the desire to invest successfully. If anything, my hope is to push you to understand the glaring myths that have for many years dominated the various investment areas, dispel them once and for all and provide a vehicle of knowledge, sufficient and appropriate for you to invest on your own and not continue to allow those who do not know what they are doing to take your money away from you.
Let me begin right here and suggest that, contrary to what many investment professionals say, investing in bonds that barely keep pace with inflation is not investing wisely. Such investments will offer no real path to building wealth and securing a healthy retirement. Second: if you give some thought and research to mutual funds, you will discover that mutual funds are a real scam. Third: you do not have to be an expert to manage money. Fourth: you can beat the market and Fifth: the best way to minimize risk is not to diversify. As a matter of fact, the notion of diversifying clearly shows a fearsome lack of confidence in what you do.
For the last century or so, the notion of investing without losing money has been the hallmark of successful investors. Good investors buy a piece or a slice of a business that has a good value and waits for the market to move in a way that allows that business to bring a great price. One of the critical elements in good investing is the ability to wait – not watch. No one can cause something to happen in the market by looking at a computer monitor.
To invest successfully is to invest with certainty. This requires that you know the business, and its potential for future cash flow and that it will not fail. If a business will not fail, what stops you from purchasing that business? That’s what it is in a nutshell. When it is clear that the business will not fail, the next step is to buy the business at an attractive price, usually 50% of its worth. It is what Warren Buffett describes as buying dollar bills for 50 cents or as Phil Town usually says,
buying $10 bills for $5.
Investing in a way that benefits you therefore, is to invest in businesses at an attractive price to generate consistent future cash flow. It requires the following:
-Know how to analyze a business
-Know when a business is on sale for a good price and when to but it.
-Which investors you should study and emulate?
-What should be in an inflation proof portfolio?
-How to make market risk powerless
-How to create a retirement portfolio free of worry and fear.
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Albert A. Evans