By Matthew Carr Investing is simple. Not easy.
You should understand this distinction. So allow me to clarify with a quick story…
I was listening to a gentleman probably 20 years older than me talk about how his guitar lessons were going.
He was intelligent. He was well-educated and successful. When he was a boy, his family pushed him toward the sciences and engineering. (He ultimately built a lucrative career in this field.) But in order to foster his success, they kept him away from anything having to do with the arts – music, painting, etc.
It wasn’t until three years ago that he decided to take up the guitar.
“It’s very frustrating,” he admitted. “I thought I would be better by now.”
All of his other successes – his aptitude for science and math, his mountain of professional accomplishments – had made him feel invincible.
He figured that if he read voraciously about music theory, he would pick up a guitar and, magically, be able to play like Wes Montgomery or Stevie Ray Vaughan. He didn’t expect he would have to put in the same amount of hard work that had been required in his professional life.
That dawning realization seemed to have knocked him back on his heels.
“I just want to be able to play something others can appreciate,” he said. “Something I can appreciate.”
At one point or another, I’m sure you’ve felt this way about some aspect of your life.
Most people get this feeling when they first start investing. And I believe a lot of this frustration – including claims that the markets are rigged or unfair – comes from the idea that you can just jump in and instantly be successful.
As I said, investing is simple… but not easy.
In fact, buying shares of a company online is less complicated than ordering a pizza. You just enter the ticker symbol and how many shares you want, and then press “submit order.” It doesn’t get simpler than that. (Alexander Green recently wrote about that here: “The One Investment Technique That Beats Growth… and Value.”)
But buying shares in a good company… an investment that’s going to generate strong income and/or returns? That’s far more difficult.
You have to understand whether the valuation metrics are good or bad…
Whether the company’s growth opportunities are solid…
If the management is intelligent and overcoming the challenges that dog its competitors…
There’s a lot to consider. And even if it all looks perfect – everything is in tune – some black swan event can always cause your investment to go belly up.
It’s how you respond in these moments that will determine if you belong at the “novice” table… or if you can sit amongst your more seasoned counterparts.
Most novice investors would opt to “average down” – that is, buy more shares of an investment that’s falling in value. They tell themselves that, by doing this, they’re moving their cost basis lower.
They fail to recognize that their cost basis is still well above the company’s current valuation.
I’m a proponent of using trailing stops. They eliminate the emotional side of hitting the sell button.
Losing money always …read more
Source:: Investment You
The post Investing Is Simple… but Not Easy (Here’s How to Succeed) appeared first on Junior Mining Analyst.