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The Courage To Get Rich

By Dr. Steve Sjuggerud
Wednesday, March 1, 2006

Rick Rule lives well...

He spends the winter in New Zealand (because it’s summer there). He spends the summer in Vancouver Canada. And in fall and spring, he’s in Southern California.

In New Zealand, Rick has over 1,000 acres, on the ocean. I visited him there over the weekend. While my kids played on the beach, Rick told me:

“Steve, I’ve got to thank you... a few years ago, you told me something that’s really made me a lot of money.”

Rick is one of the smartest guys I’ve ever met. After 30+ years in the investment business, most of it spent running his own brokerage/investment banking business, he knows money. I’m comfortable saying Rick knows as much about making money as anyone I know.

Rick has a lot more experience than me. But we’re both in the same game... figuring out how to turn money into more money. The game is hard, but it’s a lot of fun to both of us.

“So what was it that I told you Rick?” I asked him on the beach.

“I remember it plain as day... It was at an Investment U conference. You told me, Rick, you’ve got to have the courage to be right.”

Maybe he remembered that because it’s not very often successful money men like Rick get told how to do things. (It’s even rarer if they actually take the advice.) 

Rick went on:

“Steve you were right. For decades, I’ve bought things at 50 cents on the dollar, and I’ve sold when those things approached fair value. You told me that I was leaving a mountain of the gains on the table... that you never know how high something could go... and that you can simply use a mental trailing stop to both protect yourself and more importantly, to potentially get out at a much higher price.

Steve, You told me to have the courage to be right.”

To me, if Rick is doing this now, he’s the complete investor. He’s got it all...

Better than almost anyone, Rick knows how to buy valuable assets cheaply. Now, he’s using a technique to really maximize the value of his hard work. He has the courage to not only make good money – but to make even more – on his ideas.

At this point, I don’t think Rick really needs much more money. I think he just loves the game like I do. It just happens the scorecards in this game are the account values... both his and his clients.

The game is simple. As they always say... you buy low and sell high.

The technique we can use to sell high is a simple idea called a trailing stop.

As a rough rule, I recommend using a 25% trailing stop in my newsletter True Wealth. So, if we own a stock at $10, and it goes to $20, and then falls by 25% down to $15 a share, I get out. It’s down 25% from its high since I bought it.

As an example, back in 1999, my colleague Porter Stansberry recommended buying shares in a company called JDS Uniphase (JDSU) in the newsletter I was heading at the time, The Oxford Club. The stock soared over 1,000% before falling by 25%. We sold when this happened, pocketing around 900% gains. The stock kept falling, right back down to where it started.

If we had held on after JDSU started falling, we wouldn’t have made a dime. But we had the courage to let it ride... we had the courage to get rich. We had our trailing stop strategy in place and the discipline to follow it and get out.

Of course, they don’t all work out like this. And you can vary the strategy, like tightening up the stop so you don’t have as much downside risk. But the point remains:

When one of the world’s smartest investors thanks me for a tip I gave him that has made him a lot of money, it’s probably worth sharing with you.

You’ve got to have the courage to be right... to let your good calls ride. As I said to Rick a few years ago: 

You never know how high an asset’s price can soar... so you can simply use a mental trailing stop to both protect yourself and more importantly, get out at a much higher price.

The courage to be rich... to let a big winner ride... is just as important as the courage to be right in this game.

Good investing,


Market Notes


Nowadays, we can hardly find a financial media outlet without seeing a headline about how terrible America’s finances are.

We read of how consumers are tapped out… that nobody saves money anymore… that the nation’s finances are rotting at the core. We’ll simply point out “the market” disagrees. The market is saying the finances of America are just fine.

The market in this case is the price action of the iShares Dow Jones U.S. Financial Sector Index Fund (IYF). This exchange-traded fund (ETF) is made up of financial titans like Citigroup (C), JP Morgan (JPM), Morgan Stanley (MS), and American Express (AXP).

These are the companies that benefit when loans are paid back, when businesses expand, and when stocks and bonds are purchased. As the chart below shows, the big boys of finance are doing brisk business as a whole… and rising stock prices reflect the good times.

New highs… the past three years of the iShares Dow Jones U.S. Financial Sector Index Fund:

We’ll continue to keep an eye on this chart… if substantial economic problems are around the corner, poor stock price performance of the “high finance” group will let us know. But for now, it is strength upon strength for the financial backbone of America.

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