Disciplines to Dramatically Increase Your Wealth
Can Trump Save the Economy From Annihilation?
Dear Reader,
We’re amazed at the resilience of the Trump economy, especially in the face of significant problems that will eventually raise their ugly heads.
We’re talking about the debt explosion, Social Security insolvency, states facing bankruptcy, the pension crisis, etc.
The stock market has been holding steady and precious metal prices have suffered yet another decline.
Are things really getting better? How good are those employment stats?
And let’s not forget that inflation is almost certainly picking up, especially in the face of higher interest rates and burgeoning commodity prices.
Kerry Lutz of the Financial Survival Network recently interviewed me on his show to discuss the Trump economy and the systemic problems he will have to somehow overcome to make America great.
Rich Investing Vs. Poor Investing
We often hear from commentators to buy the dip, or as popular blogs refer to it, BTFD… Advice that can work in your favor if you know and trust what you are buying.
It takes courage to go against the crowd. Overcoming your own natural emotion is not an easy task.
First off, we have thousands of years of natural order that taught our brains to stick with the herd: eat in groups, hunt, sleep, live, and move with the crowd.
For Homo sapiens, this was about survival.
The feeling of jumping in a hot investment sector with everyone else feels good, too. We can’t all be wrong, right? As tech stocks hit new highs in 2000 and real estate bubbled up in 2006, investors and speculators that were late to the party piled in, fearing they would miss out.
As stocks and real estate crashed in 2008/2009, everyone was fleeing, when in reality, a stock like Pfizer (one of my personal favorites) was trading at a P/E of 5. And in places like southern California, it became cheaper to own than to rent.
Besides having the conviction to stay the trade when going against the crowd, I think to be a true contrarian you have to have one essential and core value:
Patience
Not ordinary patience, but a timeframe of five to ten years – or even more. Look at Rick Rule or Warren Buffett and you will observe value investors who’ve waited more than two decades for some of their investments to play out.
If you look at how the rich (or family offices with $50 million or more under management) invest, they are able to stay a good trade even through the worst of bear markets because they have no fear of retirement.
The late Richard Russell talked about how the rich have an advantage when it comes to investing since they’re already rich.
A middle class investor is often in a rush to get rich, while the wealthy individual is more focused on preservation and income.
I believe it is here where 95% of your net worth should be focused on, preserving what you have and growing it with
multiple streams of income.
There is also nothing wrong with just holding cash until the right opportunity comes along.
But when you do pull the trigger on a public company, treat it as you would any other business you take ownership in.
Warren Buffett says that every time he buys a stock, he buys it with the mindset that the stock market could close for the next five years.
Don’t let the liquidity of the public markets blind you from the real underlying value of the business.
Liquidity is likely your best friend and worst enemy when buying publicly-traded stocks.
The idea of being able to own part of General Mills or Apple Inc. is amazing, however, this liquidity of shares that helped you enter this business is the same asset that will drive you out of great investments when markets become highly irrational.
A Real-Life Example
In 2006, my wife and I bought a $120,000 investment property, only to see it fall to about $65,000 in 2009. If this were a stock, there is a good chance I would have sold it or stopped out, but because it is real estate, I never thought about selling it. The tenants continued to pay us about $1,200 per month all throughout 2008-2009 and through today, where that property is now valued at $135,000.
Real estate is not very liquid, and that actually helped. It saved me from doing something irrational, like selling at the bottom.
3 Disciplines to Dramatically Increase Your Wealth:
- Buy hated investments.
- Wait until market extremes and large percentage drops.
- Only invest what you can afford to lose.
Setting up investment disciplines for yourself and sticking with them over a long period of time is a mindset for success.
Best Regards,
Daniel Ameduri
President, FutureMoneyTrends.com
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@futuremoneytrend I really liked your example as you did not sell your house while going through those hard times but you kept your eyes on the passive income, that's smart investing, thanks for sharing!