rss

The Tortoise and the Hare

Once upon a time, there was a young hare, a hotshot rabbit investor who would always brag to anyone that would listen and that he was the smartest, fastest, best performing investor in the world. He would constantly tease the old tortoise about his slow, solid investment style.

Then, one day, the annoyed tortoise answered back: “There is no denying that you are very aggressive in your investment strategy. You take very high risks and get high returns. But even you can be beaten.”

The young hare squealed with laughter. “Beaten? By whom? Surely not by you. I bet there’s nobody in the world that can win against me, because I’m so good. If you think that you can beat me, why don’t you try?”

Provoked by such bragging, the tortoise accepted the challenge. Each of them put an equal amount of money into a new account and the race was on. The hare yawned sleepily as the meek tortoise trudged slowly off.

As might be expected, the tortoise invested in high quality blue chips, companies with household names.

The hare, as anticipated, invested his money in dotcom stocks and options.

You know the story. The aggressive hare jumped out to a big early lead. In a rising market, the highest risk stocks perform the best. This is called momentum investing. Money flows into the investments that are performing the best.

The hare, having jumped out to such a large early lead, stopped paying attention to the market environment. Basically, he fell asleep. He thought to himself, “I’ll have 40 winks and still remain way ahead of that stupid old turtle.” (more…)

12 Rules to Invest

1. Do not let trades become investments, but it is ok to let investments become trades.

2. Personality first. Know yourself! (The markets will exploit your weaknesses)

3. Develop your own approach.

4. Be flexible because you will be very wrong.

5. Find mentors. Today! Don’t expect anything from them.

6. START today. While learning how to invest, decide on an amount that you can invest in the markets and dollar cost average. Invest an equal amount of money once a month or quarter for a long period of time.

7. Keep your costs down.

8. Focus on your strengths, invest some profits in your weaknesses.

9. Do not ‘practice’ investing and do not call your investing money ‘Vegas’ money. Develop a routine.

10. Write it down! Start a journal.

11. Immerse yourself in the language of the markets and investing. It has never been easier.

12. Knowing when and how to sell remains the most mystical of processes. I just say do it consistently. There is no shame in leaving money on the table.

Go to top