Aug 12 2008
The Secret To Investment Success
Know what it is? I learned it over 30 years ago the hard way.
The secret is patience.
Back then I discovered that if I stuck with my ownership-based investment strategy over the long haul and outlasted the quitters and ignored the critics, I would someday be in a better position than the majority of my peers.
This is why I continue recommending the investment model I’ve used since then:
Three decades of market cycles have proven this to be a very robust, long term strategy. A key point to bear in mind is that it is not perfect.
It doesn’t eliminate the yo-yo behavior of the market and one should expect to lose money 2 to 3 times per decade. Once in awhile — like now! — the yo-yo drops down a significant amount offering investors a glorious buying opportunity.
For The Record: My current investment portfolio looks identical to the above illustration minus the bond deflation hedge for the simple reason that I cannot argue for deflation.
But my Mama didn’t raise no fool.
What if we enter a similar environment like 1979 under then Federal Reserve Chairman Paul Volcker when we experienced severe tightening in monetary policy? If that’s the case, I’ll add in that second hedge position in no time.
But nobody knows what will happen in the short run.
Long term, though, all signs point in the direction of more inflation. And as inflation continues, so does the risk of owning investments tied to the value of a fiat currency like the dollar. Your buying power will be taken from you over time, or possibly overnight if the bottom falls out on the derivative market.
Here’s the irony in all this. The vast majority who are not financially and economically literate (not you, of course) will continue stashing their long term assets into bonds and bank CDs thinking their money is safe.
Americans living centuries ago on a gold standard would have looked for the nearest two-by-four to whack these people up side the head hoping to instill some common sense. Any time an investment is not linked to a tangible asset, the long term safety of that investment instantly goes bye-bye.
Populations today remain blind to that fact, except for the few who go out of their way to learn the rest of the story.
KEY LESSON: Even if you are making sound decisions with your money now, it still takes time to be successful. The frustrating part is when you don’t see expected results immediately. The good news is that over time, your success will continue building piece by piece.
Unfortunately many investors take on the mentality of a sprinter and run out of motivation and discipline before the race even begins. Ignore them. Ignore the financial media that glorifies short-term headlines. Listen instead to your own common sense and make a plan for success over the long haul. Because for most us, that’s how long it takes.
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Hi Roland, I enjoy your sharing experiences, read your biography. I’m from Buffalo, NY, although I reside in Italy because of family ties. Italy is a bad place, a tourist likes it, a resident doesn’t but I make the best of it. I worked in Alaska on the White Alice early warning system about 1957-1961, then transferred to NATO Europe American Forces. Remember the Soviet Premier Kruschev, when he was protesting and pounding his shoe on the UN table because the U.S. flew a U-2 over Russia and Francis Powers, pilot was shot down. A world wide alert was called but no one could respond efficiently enough, I think it probably was as bad as the Cuba missile crises that happened later. The whole electronic communications early warning system chain from Turkey, Greece, Italy, through France, Belgium, Germany, UK, Iceland, Greenland, Canada to NORAD was broken, because France under Charles De Gaulle defied the U.S. De Gaulle as you might remember wanted to command forces in Europe. Anyway, talk about terrorism and sabotage eh, that’s what France did, shut down the whole communications chain when the alert was called, NATO could not respond. B-36 flew all over surrounding Russia for 24/7 for years. Unbelievable eh! But all true. France was out of NATO because they had the A-Bomb, etc. Anyway, long story. After NATO contracts terminated I went to work in Saudi Arabia for Aramco, oil company, stayed 17 years. I received a nice severance pay and rolled it over to an IRA. I was doing great, periodically exchanging funds online a few times a year, but about April and again in about June I guess, year 2000, Fidelity wrote me not one letter, but two letters of reprimand that I was not to go switching or exchanging funds because poor ole’ management could not control managing the funds. So after an online phone discussion with Fidelity, a heated one, they insisted and so I hung on; thus I lost like 72% of my IRA. I am struggling now, but I don’t see any way to even make a bit of it back again. I’m now 77, so I don’t intend to give it a try anymore. Best to you and you endeavours..
Victor Bucci
Victor, what exactly were you invested in that has not recovered by now?