Avoiding the noise is probably the hardest things to do as a long term investor. Most people hear the news or check stock prices and view it as a good or bad thing. I believe checking stock prices or hearing others opinions about the market as a whole is a very bad idea. Fidelity's best investors are dead, and your goal as a long term investor, is to act more like them (and not actually die). Most people, especially single men try to tinker with their portfolio too much to achieve higher returns. The best return on anything is return on non-investment which is basically avoiding consuming things you don't need.
Do not check stock prices, do not read macro opinions, and avoid financial news like the plague. They are all over the internet, including from people like Ron Paul. This is the best advice for all long term investors. Stock prices are uncontrollable, and viewing them every second of every business day does not make you any better.
Individuals that invest in dividend paying entities must focus on two things; the state of the dividend and earnings. These two metrics will show the investor that their company is doing well or poor. I get alerts sent to my email every time one of my companies releases earnings results. Focus on these items only and avoid daily price quotations to achieve better results for the long term.
Saturday, October 10, 2015
Long Term Investing Tip: Avoid Stock Quotations and Financial News
Beware of the minute by minute news and stock quotations. They are not good for your health and your portfolio. I admit to doing this more than I recommend because it is a difficult habit to get rid of. I invest in stocks and do not intend to sell for years. Therefore I do not need a daily stock quotation or any piece of financial news. Once financial news about my company that I own is out, then it immediately gets priced in and I am too late to trade. Often times this can erode one's returns dramatically. Financial news is seductive to the point where I want to review every hour what the news of the day is. They act as if they are telling me something important that I must act upon. I am not in that game.
I am in stable businesses that have enormous moats of safety and dividends and do not need to check quotes every second. Checking quotes and CNBC.com or Bloomberg can actually make you a worse investor and may make it more likely that you trade. I have done this a few times as well, and focusing on the news or the Federal Reserve and made a trade to the downside.
Mentally, it is not good if I focus on quotes or check the news. In fact I need to get away from it as much as possible. The smartphone has made it accessible for anyone to check business conditions any minute of any day. This has never happened before in the history of Man.
Checking stock quotations on your smartphone can make you sick. It certainly increases my stress levels when I do this. It is like gambling at the casino, you want to win, but it is out of your control. The next item is to determine if you have a large enough emergency fund to withstand any unemployment shocks for at least a year. If so, then you do not need to check stock prices at every moment. Of course we want our net worth to increase, but this does have a profound effect on individuals that are sensitive to price changes. Back in 2008 I did not even have a portfolio but I wanted to check the financial news because I thought that would make me a better business student. This is far from the truth. The more business news I was receiving, the more negative I was getting. I was becoming a victim from my habit of watching CNBC. I was getting a daily barrage of negative news about the economy and it was affecting my life. Unfortunately I did not realize this at the time and it would have been better to avoid watching that TV Channel.
Prices of stocks are basically the price of a share of the business. Prices can fluctuate at any point in time, just like if I was to sell a McDonald's franchise down the street. Most likely however, I won't be checking the price of my McDonald's franchise and I will be focusing on the income that is derived from the business. From this moment on, I will avoid checking stock prices, SeekingAlpha.com, CNBC.com or Bloomberg as these can lead to adverse reactions as an investor. Similar to if I was checking Facebook and viewing my friends that are getting married and having babies causing distress to some, checking prices can cause negative reactions to people that are sensitive. I am focused on the long term and I do not need to check the price of my businesses every day and every moment.
My professor said in one of my personal finance class and said: do not check your stock portfolio every day. Some people people get worried or upset when they see red in their account. I believe this to be true even though I focus on income. I need to avoid stock quotations and financial news like I avoid visiting cnn and fox news.
Passive Investments are Freedom
Income from dividends or interest is basically freedom from having to work a job. Most Americans work today to pay for necessities such as food, shelter, and clothing. Imagine for a moment someone had passive income coming in from investments such as stocks that replaces their income from a job. Imagine they would not have to do anything else except live another day.
My goal in life is to avoid being miserable working a job for 50+ hours per week and burning myself out by 40. Then going into debt to purchase material goods because that job doesn't provide any happiness. I think most Americans would say they would want that too but are not prepared for the sacrifices of today. My long term goal by the age of 40 is to receive more than enough income where I can comfortably say no to more work. I won't have to continuously upgrade my skills and network to keep up with the economy. I won't have to think about getting my next paycheck at all.
Of course, I personally do not actually want to stop working at age 40, because that causes all kinds of mental issues that retirement creates, isolation, massively bored, etc. When I am receiving more income than I need or want, then I can quit my traditional job and work on different projects, only if I want to. What these projects are could vary, they could be investing in new businesses, purchasing homes and renovating, or investing in small businesses. Many people retire and then they are bored because they have nothing to do. I don't want that to happen to me. I like to be around people, and there won't be that many friends around that are retired at age 40. Quitting work too soon might not work mentally for me.
Another reason why dividends and interest payments are freedom is that I can easily withstand an unemployment shock. If there are massive layoffs due to new and improving technologies, then I can easily be laid off from a job and not worry about my next meal. This is why I am sacrificing what I can today so I can do withstand this down the line. I am continuously investing my cash into businesses where I believe I will receive a superior income return than a regular plain Exchange Traded Fund.
My goal in life is to avoid being miserable working a job for 50+ hours per week and burning myself out by 40. Then going into debt to purchase material goods because that job doesn't provide any happiness. I think most Americans would say they would want that too but are not prepared for the sacrifices of today. My long term goal by the age of 40 is to receive more than enough income where I can comfortably say no to more work. I won't have to continuously upgrade my skills and network to keep up with the economy. I won't have to think about getting my next paycheck at all.
Of course, I personally do not actually want to stop working at age 40, because that causes all kinds of mental issues that retirement creates, isolation, massively bored, etc. When I am receiving more income than I need or want, then I can quit my traditional job and work on different projects, only if I want to. What these projects are could vary, they could be investing in new businesses, purchasing homes and renovating, or investing in small businesses. Many people retire and then they are bored because they have nothing to do. I don't want that to happen to me. I like to be around people, and there won't be that many friends around that are retired at age 40. Quitting work too soon might not work mentally for me.
Another reason why dividends and interest payments are freedom is that I can easily withstand an unemployment shock. If there are massive layoffs due to new and improving technologies, then I can easily be laid off from a job and not worry about my next meal. This is why I am sacrificing what I can today so I can do withstand this down the line. I am continuously investing my cash into businesses where I believe I will receive a superior income return than a regular plain Exchange Traded Fund.
Saturday, September 12, 2015
Return on NonInvestment
There is a return on non-investment. The return on non-investment is 100%. The vast majority of people do not understand this, or think this is all wrong. If I do not spend $1,000 today on some gadget, I can invest that money in income producing assets. Some people think one needs to be a millionaire to be an owner of a business. Individuals that save in their 401(k)'s most likely have a stock component which translates into ownership of hundreds of businesses with thousands of employees.
One can invest in as little as $50 per month with some online brokerages. The question then becomes, why do so few people do it? There are a few things that distract one from achieving financial goals. These include knowledge, attitude, and patience.
Knowledge is the most important piece. Without it, the investor will be lost and not know where they are going. Knowledge is built upon by understanding what they are purchasing in their 401(k). Knowledge is power in the investment world.
The next piece is attitude. If one does not have a good attitude towards future business growth, they will simply stay a spendthrift or invest 100% in gold pieces.
The last piece is patience. Not many people have the patience to invest $50 a month to see a return years later. That is why one should increase their savings to as much as they can.
The return on non-investment concept is very important especially if one is considering the sales and retail gimmicks going today. If something is 20% off that doesn't mean one should buy it. One still has to trade 80% of their cash for that item. If they do not buy the product, the return on non-investment is 100%.
One can invest in as little as $50 per month with some online brokerages. The question then becomes, why do so few people do it? There are a few things that distract one from achieving financial goals. These include knowledge, attitude, and patience.
Knowledge is the most important piece. Without it, the investor will be lost and not know where they are going. Knowledge is built upon by understanding what they are purchasing in their 401(k). Knowledge is power in the investment world.
The next piece is attitude. If one does not have a good attitude towards future business growth, they will simply stay a spendthrift or invest 100% in gold pieces.
The last piece is patience. Not many people have the patience to invest $50 a month to see a return years later. That is why one should increase their savings to as much as they can.
The return on non-investment concept is very important especially if one is considering the sales and retail gimmicks going today. If something is 20% off that doesn't mean one should buy it. One still has to trade 80% of their cash for that item. If they do not buy the product, the return on non-investment is 100%.
Long Term Investment Mindset
Hello! Welcome to my blog. I will be sharing my views on investments and general life. From when I was a teenager, I was hooked on understanding how the world works. I started reading business books at a young age, including books about money and the stock market. I traded stocks when I was a teenager. I moved on from that into other strategies when I became wiser. My passion in life is investments. I love understanding what is going on and how I can do better. I have been buying stocks since a young age, and continue to do so on monthly basis.
The first concept to know is what an investment is. An investment is basically a cash outlay where one seeks a return at a later date. It is delaying today's spending for tomorrow. It is about buying or starting a business where one will receive cash in the future. Investments are about returns of capital.
The largest and most important return that an individual or family can receive is savings. The return on non investment is 100%. Instead of spending $1,000 on a new computer, that cash could be saved for other purposes. When one decides to save that $1,000, they receive a cash return of 100%. There are many people around the world that do not understand this, which is why this blog is sorely needed.
Next, one needs to find where this excess cash should be used. They can either spend it on discretionary items or save it and invest. Today there are a myriad of investment options that one can easily get confused. If an individual has spent their lifetime learning one trade, they may not like to learn how to manage their own money. They must however, because there are thousands and thousands of brokerages and financial advisers out there with different styles and recommendations. The investor must understand what their financial adviser explains to them.
The strategy that I have specifically embarked upon and practice today is buying and holding. Buying and holding has been around for a very long time, hundreds of years. I believe this strategy is far better than any other I have encountered. The next concept to learn is what type of investments are best and how we can achieve superior returns.
The first concept to know is what an investment is. An investment is basically a cash outlay where one seeks a return at a later date. It is delaying today's spending for tomorrow. It is about buying or starting a business where one will receive cash in the future. Investments are about returns of capital.
The largest and most important return that an individual or family can receive is savings. The return on non investment is 100%. Instead of spending $1,000 on a new computer, that cash could be saved for other purposes. When one decides to save that $1,000, they receive a cash return of 100%. There are many people around the world that do not understand this, which is why this blog is sorely needed.
The strategy that I have specifically embarked upon and practice today is buying and holding. Buying and holding has been around for a very long time, hundreds of years. I believe this strategy is far better than any other I have encountered. The next concept to learn is what type of investments are best and how we can achieve superior returns.
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