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The Toughest "Easy" Lesson You Must LearnBy
Wednesday, July 20, 2011
If you want to get rich investing... if you want to make a fortune... you must learn this simple lesson...
In principle, this lesson is so easy, you could teach a monkey to do it.
But in practice, almost nobody is able to do it.
And this is actually easy to do... It's not like trying to lose weight, where we know what to do, but it's hard to stick to it. But still, nobody is able do it.
I have a hard time with it myself, darn it... and this is my career! I've gotten much better at it over the years though.
What is "it"? What is the lesson?
The lesson is doing nothing...
You see... the big gains are in the big trades.
Your lifetime investing success is hiding in your big trades. If you sell early – if you never give a trade a chance to become a big trade – you'll never get rich investing.
Legendary speculator Jesse Livermore explained it best in the 1923 book Reminiscences of a Stock Operator:
After spending many years in Wall Street, and after making and losing millions of dollars, I want to tell you this: It was never my thinking that made the big money for me. It always was my sitting. Men who can both be right and sit tight are uncommon.
In my newsletter True Wealth, we've stuck to our "script" of owning stocks and owning precious metals investments since the market bottomed in March 2009. Here in the second half of 2011, we're still sticking to our script.
In March 2009, just after the stock market bottomed, I told True Wealth readers, "I believe the entire stock market could rise by 50% from its lows last week over the next 18 months. And the next seven to 10 years could be phenomenal..." And I recommended a precious metals stock.
Last summer, I ran the headline "A Potential Bull Market in Everything" for one of my True Wealth issues. And in the latest True Wealth, out last week, the conclusion was the same... Own stocks and own precious metals investments.
The conclusion has stayed pretty much the same for nearly two and a half years. Both gold and stocks are up some 65%-plus in that time. Hopefully, we're offsetting any "boredom" subscribers might have from hearing the same conclusion with all the money they've made in that time.
.gif) "Men who can be both right and sit tight are uncommon," Jesse Livermore reminds us. In True Wealth, I've done my best to be right AND sit tight.
Our script is still the same... Own stocks and own precious metals investments.
We are in the midst of the Bernanke Asset Bubble, which – when it's all said and done – may turn out to be the greatest asset bubble (in stocks and gold) the world has ever known. That is worth staying on board for.
Don't get antsy. Don't feel the need to "stay busy." Don't trade away your winners too quickly.
Stick to the simple lesson. Be right, and sit tight!
Do nothing. For as long as you can. (And then longer.) It's possible you could come out of it with more wealth than you ever imagined.
But you've got to do nothing, for longer than you can bear it. You've got to do the tough part... and stick with the easy lesson.
Good investing,
Steve
Further Reading:
Check out more common-sense investing advice from Steve here...
"These two rules force us to avoid two of the biggest mistakes investors make," Steve writes. "Our rules keep us in the money."
Steve shares "the recipe for big gains." It's two simple things you need to know to be a profitable investor.
"If you're guilty of this, it will keep you from making money," Steve warns. "Worse, it could cause you to lose a lot of money. And if you don't change this behavior, you will lose money for years."
Market NotesBAD NEWS FROM AMERICA'S FINANCIAL BACKBONE It's still "trench warfare" in the XLF... and the sellers are winning.
Regular DailyWealth readers know we monitor the big U.S. financial stock fund (XLF) to gauge the action in the banking sector. With large weightings in JPMorgan, Bank of America, Goldman Sachs, and Citigroup, XLF represents the backbone of the U.S. financial system. It rises and falls according to America's ability to earn money, save money, service debts, start businesses, and generally just "get along."
Like most assets, XLF staged a big rally off its 2009 credit crisis low. This rally fizzled in early 2010... and XLF has been stuck in a giant sideways trading range ever since. Neither buyers (who believe low interest rates will goose earnings) nor sellers (who believe America in general is headed lower) have been able to create a trend in financial stocks.
As you can see from the chart below, XLF is still stuck in its giant sideways "trench"... And in the past few weeks, the sellers have managed to push the fund toward the lower half of its trading range... and to a multi-month low. We state once again: As the finances of America go, so goes XLF. Right now, it's going nowhere. The broad market needs this fund to wake up in order to head higher.
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