Wednesday, March 21, 2018

Chasing Shiny Objects

Everything I do in investing my money has my long term retirement plans in mind. I try hard as hell to not get distracted off the beaten path.

I never borrow to invest. To do that I would have to open a margin account. The ability to invest more than one has on a bet has never really appealed to me. Sure, you might be able to make more but the thought of losing more scares me away.

I never suffer from the fear of missing out on something or FOMO as it's called. Right now, the distractions are all around you in the form of these temptations.

Tie yourself to the ship's mast and put some wax in your ears for fear you'll hear the siren song and wreck yourself on the rocks.

Shiny Objects to Avoid

  •  crypto-currencies
  •  bitcoin
  •  ethereum
  •  blockchain
  •  pot stocks
  •  lithium and cobalt
  • junior mining stocks
  • real estate flipping

There is always something distracting investors away from their index or dividend growth strategy. Warren Buffett put it this way,

"Why would you want to risk what you have and need for something you don't need?"

Long term dividend growth investors win because they focus on yield combined with dividend growth to grow their nest egg. Y + DG = Return. When you combine that with the compounded time value of money it's a very powerful combination.

What it's not is quick and sexy. Investing is boring and should stay that way. Go see a movie and have dinner with your SO if you want excitement.

Index investors also win because they just want to capture the average total return that the market gives them. They never speculate in junior gold stocks and acting like they are smarter than the rest of the people trading stocks for a living.

Do some make money? Oh sure they do because they got lucky. Eventually luck runs out, margin calls are made and you never hear from them again.

This is what makes a market. A buyer and seller on both sides of the trade. We again win because with retirement years away we don't sell very often, if at all.

Just because your next door neighbour knows a guy who knows a gal who made a fortunate in bitcoin doesn't mean it's a good investment for you. Chances are the minute you invest it starts to dive bomb down or blow up altogether.

None of these investments pay a dividend. Numero #1 reason for me to stay away. Everything I own has to pay me to own it. EVERYTHING!

I really do think the main reason investors start chasing all the shiny objects in the investing marketplace is because they are constantly looking at their portfolio and then doubting themselves that they are doing the right thing.

Even worse, they are thinking about trying to do better by jumping into a hot trend and then jumping out.

A really good way to help you through that is to read and up your game from some of the masters and icons of investing. Your investing library should include some or all of these texts. Your local library might have them, start there. The search is worth it.

The Intelligent Investor - Ben Graham
Winning the Loser's Game - Charles Ellis
A Primer on Money, Banking and Gold - Peter Bernstein
The Investment Zoo - Stephen Jarislowsky
Berkshire Hathaway, Letters to Shareholders - Warren Buffett

Related Posts: 

7 Reasons Why I Love Dividend Investing

Dividend Growth and Your Retirement

Recommended Reading:

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