Can you tell me what is so glamorous about Jacques Lemaire’s Devils trap system put in place back in the year 2000? Can you tell me what is so exciting about losing weight through healthy nutrition and daily exercise? Or maybe you can tell me what is so attractive about Scarlett Johanson and Justin Timberlake…
Okay, my last example was not right, but the first 2 were. Lemaire has been known for 2 things in hockey;
#1 making the game less exciting since less goals are scored
#2 winning the Stanley cup with a methodical and conservative hockey system.
Losing weight through daily exercise and eating healthy will never be advertised on the first page of People Magazine and it will never sell any miracle products; but it sure works!
Investing should fall into the same basket. Investing is not made to be sexy but it is there to accumulate money and help it grow. Sure there are times when investing gets exciting and attractive… for gamblers. Day trading, using leveraged ETFs or short selling the market are sexy ways to invest. But they become less exciting when the investor discovers the risk beyond the “strategy”.
Amongst all the investment strategies, I’d say that dividend investing is probably the least sexy of all. The basis of dividend investing consists of carefully selecting great companies that increase their dividends overtime. It requires qualities such as:
– being patient
– being analytical
– being conservative
– avoiding greed
Dividend Monk said on this blog that a dividend portfolio competition would probably be the less interesting to follow as each participant would pick their stocks….and wait to accumulate dividends!
When I first started trading, I had a lot of fun making transactions each week. I was making money and the thrill of making a new trades used to give me chills. However, over time, it becomes more and more a game (or a gamble) than a rational investment decisions. What happened? After a few years, I finally hit the gambler’s wall and made a bad trade, losing 50% of my gains that year. This would have never happened if I had followed a steady and conservative investment plan.
This is when you lose money
Most people think their financial advisors made a bad move, or that they were unlucky as investors. Or even worse, they think that they lost money because everybody loses on the stock market. All these perceptions are wrong. In fact, you are losing money on the stock market because you are trying to get a high while investing.
There is currently a rush for gold on the market. The last time it was a rush for oil (back in 2007). But it is all the same. The rational investor leaves to make some room for the emotional speculator. Most of the time, the emotional speculator will lose money and the rational investor will come back to the controls a few months too late…
How to not lose money while investing in the market
There are years where you will lose money anyway. 2008 was a bad year for everyone. However, if you invested in the right stocks, you will get your money back and accumulate profits. The good side of dividend investing is that investors still earned most of their dividend payouts during 2008.
There are a few tricks to keep track of your investment strategies and to make sure you are not trying to get more highs from your portfolio:
#1 write down your investment strategy (your goal, your investment horizon, how you select stocks or ETFs)
#2 write down rational reasons why you made each trade
#3 review your reasons before selling your shares to make sure you are not trading on emotions
#4 keep your notes besides your computer to make sure you don’t forget about them 😉
#5 be patient; if you want to make a move, wait a day or two, nothing will happen during this time besides thinking throughout your future trades.
While investing is not sexy, the result IS!
The best example of this theory is probably Warren Buffet. He is a very low profile individual coupled by a very quiet profile investor. However, he is a genius by himself and knows that good investment moves will always pay back. There is nothing sexy about the buy and hold strategy, but I guess it is darn sexy to weigh more than 40G$!
When you think about it, winning the Stanley Cup, losing 30 pounds or building a 1M$ portfolio is pretty sexy, but in each case, you are better off using a conservative strategy to make it happen!Google+