A Simple Rule for Investing Success
The confetti has been swept up, the empty champagne bottles tossed out, and the New Year’s noisemakers are in the trash... It’s now time to lay the groundwork for making money in 2017.
If you have been continuously making money year after year in the market, then you can stop reading and get on with your day.
But if you’re like most investors — having a hot streak followed by a money-losing cold one, and then throwing in the towel — then I do suggest you read on.
Because in a few moments, I’m going to share with you a simple rule that I learned after being on Wall Street for more than 30 years that will help you make money.
The Key to Being Successful
Most investors think making money in the market is complex, difficult, and that the odds are stacked against them.
Unfortunately for most investors, that is the case.
They never learned how to invest properly and how to follow the one simple rule that every successful investor I’ve ever met follows.
When I share it with you, you’re going to be amazed at how simple and easy to follow it is... yet I would bet you dollars to donuts that most investors will stop using it in a few weeks.
That’s just human nature.
Warren Buffett said, “There seems to be some perverse human characteristic that likes to make easy things difficult,” and investing is no exception.
Post This to Your Wall
Simple ideas as usually discarded as being too easy or obvious.
I remember when I was first introduced to this idea more than 30 years ago when I started on the trading floor. I nodded my head when an old timer shared it with me.
There was no way I was going to take his advice... it seemed too simple.
Well, more than three decades later, I can honestly say that knowing this important idea — and keeping it at the forefront of every investment decision I’ve ever made — made me lots of money. More importantly, it saved me from making disastrous decisions.
Now that I jabbered on for more time than I should have, here it is: “Avoid serious loss because that is the precondition to making high rates of return.”
That’s all there is to it.
I know you might be thinking, “Charles, you've gotta be kidding me. That’s all it takes to make money in the markets?”
The key to making money is not making an investment where you can possibly lose most or all of your money. You shouldn’t invest a nickel if the chances are high that you can suffer a permanent loss of capital.
Because once you do, there is no hope of ever making it back.
Think for a moment of all the penny stock investments you might have made, or stocks you bought that never earned a nickel of profit, or an investment you made in a stock that had a balance sheet drowning in debt.
Those are investments that should have never been made. If there is a slim possibility of losing your total investment, move on to the next investment.
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Simple Ideas are Best
If you avoid serious losses, it makes it that much easier to make money over the long haul.
Consider an investor starting with $100,000 who made the following returns over the past five years:
Year 1: +25%
Year 2: +35%
Year 3: +10%
Year 4: +50%
Year 5: -80%
Could you guess what this investor’s total return would be at the end of year five? The total return would be -44%. That $100,000 investment would now be worth only $55,700.
After four successful years, the investor ends up with a negative return to show for all their hard work.
Going into year five, the investor really believed he or she was able to walk on water... and forgot to follow the simple rule of avoiding serious loss.
Albert Einstein said, “Most of the fundamental ideas of science are essentially simple and may, as a rule, be expressed in a language comprehensible to everyone.” What works for science certainly works for investing.
Average Joe Millionaires
I’ve recently researched how blue-collar millionaires created their wealth and was shocked at what I saw.
These millionaires followed this simple idea and amassed multimillion-dollar fortunes.
I’m talking about investors from all walks of life: parking lot attendants, nurses, secretaries... all making million-dollar fortunes by investing in the stock market.
In fact, none of these blue-collar millionaires tracked interest rates or stayed up nights trying to predict next quarter’s GDP.
Instead, they followed this simple secret that Wall Street does its best trying to dissuade you from using to make life-changing fortunes.
And this is precisely the kind of investing you NEED to check out firsthand...
All my best,
Charles cut his chops on the trading floor of the New York Futures Exchange before moving on to become a wildly successful money manager on Wall Street.
And with more than 30 years of recommending stocks under his belt, Charles has knocked the cover off the ball, compiling an amazing record of success and posting gain after gain for his loyal readers. He is the editor of Hidden Values Alert and the Inevitable Wealth Portfolio newsletters.
Charles is also the author of the highly acclaimed book, Getting Started in Value Investing.