There are certain concepts and principles that I believe are absolutely critical for successful investing. I call them Beliefs because I’ve learned them from personal experience – first as a securities analyst, then as a professional trader, and finally as a portfolio manager. These are the ideas that I strongly believe will empower you to become a great investor. These core principles form the foundation of Truth that everything else on this website is built on.
Context Is Important
By context we mean your specific circumstances as an investor. Your age, your expected years until retirement, how much you have already saved, your expected income growth, are all part of the context you must consider as you make investment decisions. There is no universally correct way for every investor to approach the markets. There is no standardized investment plan, no one-size-fits-all asset allocation model, and no particular investment strategy that works all the time for all investors. The advice and coaching on this website is context-sensitive, and there are links available that are designed to help you navigate to the areas that will be most helpful for your circumstances.
Your Broker Is Not Your Friend
The folks who sell advice, whether they call themselves brokers, advisors, counselors, consultants, or associates… all share a common goal, which is to extract as much money as possible from you. This doesn’t make them bad people. It’s the reward system that’s all wrong. Brokers (by any other name) who want to survive long enough to make a living must become efficient asset-gathering machines. Their compensation depends on how much money they have under their control. They will do whatever it takes to get your account, and they will go to any length to keep it, short of actually making money for you.
Investment Skill
Contrary to the doctrine of efficient markets, we believe that there is such a thing as investment skill. It is rare to find an advisor or a money manager who has demonstrated superior investment skill consistently over time. This is because the markets are constantly changing, and the cause-and-effect relationships that exist today may not exist tomorrow. So in order for a portfolio manager or an advisor to outperform the market consistently, year in and year out, he or she needs more than skill alone. It also takes discipline, patience, courage, and adaptability. While many investment professionals possess a combination of some of these traits, very few are fortunate enough to possess all of them.
You do not have to be skilled at picking stocks in order to do well in the market. What you do need, however, is a well-conceived investment plan that is grounded in reality – what we call the true nature of the market. We teach you how to do this. You also need the motivation and discipline to carry out your plan. Once implemented, you need patience. Our models are simple and clear, but they are very robust in terms of their responsiveness to changes in the economy. They don’t require a lot of trading, so patience is a necessary skill for you to have.
Discipline
In my 30 years in the investment business I have seen many gifted and talented traders and portfolio managers come and go. There seems to be a pattern at work, where a bright young man or woman comes along and lights up the sky with breathtaking performance- for awhile. Inevitably, when his particular style falls out of favor with the changing market, he crashes and burns. This process usually starts out as a simple rough patch of underperformance, followed by panic that takes the young star away from his game plan. This lack of discipline exacerbates the problem and ultimately brings about his downfall.
Patience
Investing is a long-term proposition. No matter how skilled you are, there will be times when your portfolio is under water. It takes lots of patience to endure the unavoidable downdrafts in the market. We live in a world of bullet points, sound bites, and instant karma. Patience is nearly a lost art. But it’s one of the key ingredients in any succesful investment plan. We teach you the difference between patience and stubbornness in investment decision making.
Adaptability
The approach that worked from 1982 through 1999 stopped working in 2000. When the fundamental forces in the markets change, a skilled investor adapts to it and changes his investment plan. We teach you how to do this withoug getting whip-sawed in the process. If you study the examples of all-star fund managers who crashed and burned, you will almost always find a failure to adapt at the root of their downfall.
Courage
Courage means sticking with your plan even when the market is going against you. Studies have shown that the biggest reason for investor underperformance is the tendency to panic and sell out near the bottom of the market. While it’s important to pay attention and adapt to a changing market environment, the vast majority of investors are too quick to sell when the going gets tough. We teach investors how to develop the heart and mind of a warrior. The louder the cries of doom and gloom become, the more courage it takes to hold to your convictions. We will show you how to determine when to go against the grain, and when to adapt and change your strategy.