I’ve never written a more personalized letter in my life, but today’s letter is all about making sure that you are prepared.
The stock market is built to take advantage of our innate emotions of fear and greed and exploit them – it is a giant experiment on how well you know yourself, and it will test you frequently along your career.
The greatest lesson I learned during the first 5 years of my investment career was the power of independent thinking and sticking with facts. If you can develop self-reliance, you’re going to brush-off 95% of the info that comes your way, because you’ll able to small the bullshit.
In order to remain poised, while others are in turmoil, and in order to execute on a high level, while everyone else is shivering, you must be willing to adapt a plan of action and religiously work it.
The only way to make sure you’re in control of your portfolio is by creating a plan today. In my first year of investing, my plan was to save $1,000 a month to purchase the cheapest among these three stocks: Becton Dickinson and CO, Hormel Foods and CVS Health. The second part of the plan was to read one important investment book a month by devoting 45 minutes a day to it. The third and final part was to find a newsletter I can relate to.
Let’s put it this way – you, intuitively, know how to invest. It is all about making sure you stick with what has been proven to work.
The one strategy that has outperformed all others and will keep doing so is called compounding. It is also the most boring one, hence, only a few have the self-discipline to practice it, but the rewards are a lifetime of increased wealth.
In my 2018 portfolio analysis, which I plan to publish on the 15th of February, I’ll highlight exactly how to execute this and detail 2 examples in my own life.
Remember, following the compounding strategy properly will make you wealthier in the surest way possible.
A time is approaching to take full advantage of this because it works best in times of pessimism, like the one we’re entering soon.
Portfolio Wealth Global sees all the major indices: the S&P 500, NASDAQ, and the Dow Jones giving up 30%-50% of the gains they’ve made in this bull market – when this happens, you should consider entering the market in full force.
But, the one problem with compounding is that it takes decades to really kick into gear. The rate of return is 9%-12%, which works out to a 1,000% return in 20 years.
This means that in 2038, you’ll have a portfolio, which is 10 times bigger than today’s, pre-tax.
When you realize this (most never do), you must start to figure out how to increase the income you generate from your main career, or how you can speculate in riskier-profile stocks, run by gifted management teams, in order to speed up the process.
But, the mistake some investors make is to think in terms of days, weeks, or 2-3 months, instead of 2-5 years, especially when the stocks they’re buying are clearly in the midst of a 2-5 year business model.
Becoming a successful investor requires a commitment to emotional control few are willing to make. Furthermore, it entails being a student of stocks and reading books, which most people shy away from.
That’s why you can keep counting on the madness of mass psychology to continue mispricing stocks – there lies our opportunity.
When investors have lower expectations, buy. When their expectations are rosy, hold or sell. When they disregard a vital industry, go big on it. Lastly, when a hyper-growth sector is correcting (blockchain tech or cannabis), always buy the dip.
As for me, my plan is to keep building valuable relationships with CEO’s, so that we get access to deals in the earliest stages.
Portfolio Wealth Global’s focus is on: Virtual Reality Plays (VRP), Sophisticated Artificial Intelligence (SAI), Complex Blockchain Solutions (CBS), Advanced Cannabis Models (ACM), and Contrarian Resource Stocks (CRS).
Everyone wants quick profits (day-trading has been proven to be a losing strategy for the majority of people), which is precisely why 1% of investors make 50% of the returns of global markets – only patient investors make gains!
When you buy or sell, you must be doing it out of independent thinking – some small stocks fall 30% a day because one person hit the bid and needed to cash out, no matter what. When you own a stock, it is like owning a business – you must know everything about it, which is why my portfolio is always made up of no more than 30 stocks. You can’t allow one person, who might have needed some cash to buy his wife a birthday gift to shake your confidence.
There’s no reason in the world why you can’t join the 1% who reap the biggest rewards – nothing is special about these individuals. Their advantage over the rest is highly developed skills of un-attachment to everyday market noise, and their tunnel vision on the bigger picture.
You can do this and teach your children to practice this as well – your family will prosper and never lack anything again.