Rethinking Investing for 2009
With the start of the first trading day of 2009 comes….indifference. As of a week ago I am completely out of the public equities market. I still have some annuities and fixed income instruments but I am not exposed to the daily gyrations of the equities markets.
Why?
First of all, I think 2009 is going to bring horrors when more and more debt bombs explode.
But more importantly I’ve come to realize how foolish it is to invest in the public markets. What is an investment? Wikipedia says “Investment is the choice by the individual to risk his savings with the hope of gain.” I have a big problem with that definition. Notice the word hope? What are you doing hoping for a gain in an investment? I want to make an investment in only 2 scenarios:
1) I have an edge. I know something that almost no one else knows, and I can take advantage of it by investing.
2) I can directly influence the outcome of the investment by contributing knowledge or labor to it.
Can either of these conditions be met by a publicly traded stock? Very, very unlikely. Unless you have insider information and can get away with trading on it…but those opportunities come once in a lifetime if ever.
From here on out I will only be investing in local businesses or things that I can directly have a hand in (Internet startups).
Sure, there is more risk. But there is also more reward. No one was “supposed” to lose 30-40% in their safe and cozy mutual funds. But they did. Wouldn’t you rather have lost that money on a bar down the street that at least you could have had a few cocktails at before it failed?
I’ve learned my lesson losing money to the manipulated, fraudulent machinations of The Market.
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Hmm. You should go back to the drawing board and rethink your investment strategy. Sure, you can make better money with other investments but it’s harder to manage and find those opportunities. Plus, getting burned or being wrong about jsut one of them means you really have to hit the ball out of the park on another one.
People go about investing entirely wrong. Instead of trying to pick stocks or play the market, you treat it for what it is…relatively passive investing. If you own a broad-based index fund (like vanguard total market), you look at the historical returns…not a year of bad returns. Sure, the market is relatively flat over a 10 year period, but don’t forget massive dividends that were paid out on those same stocks. The alternative is leaving the money in teh bank where it gets eaten away by inflation.
Most people think they know what they’re doing, buy a few stocks, get killed and then get out. Or they buy a mutual fund with a hot manager and get killed by short-term capital gains and fees. Much better to take advantage of the broad-based returns by doing a passive investment strategy. For me i know that if I put the money to work I can make more…but I can’t work fast enough to put all my money to work….so I invest the remainder.
Dave,
All due respect….what’s your point? Did you even read my post?