We all make mistakes. But the more you can learn from others’ mistakes, the fewer (hopefully) mistakes you’ll make.
So here are four mistakes I’ve made – or I’ve seen other people make – that (if I’m smart) I’ll never make again… and (perhaps?) you won’t either…
1. Thinking I know more than the market
The market – stocks, real estate, and any other market you can think of – is an instant and ever-changing referendum on how trillions of dollars and millions of investors think about a particular asset. A lot of very smart people are paid a lot of money to interpret what it all means. And people with a whole lot more money than you or me have a lot more at stake than us… so they’re very focused. They know a lot about what their money is doing right now.
So the day that you feel like you know more than that incredible weight of insight – even if it’s about a single stock or obscure market – think again… because you probably don’t. You might have an angle, or a temporary edge, but it isn’t much, and it’s probably not going to last.
Even you can tell yourself that, and you still feel comfortable with buying that stock, go ahead. But do it with the full recognition that you’re probably missing out on something… and you’re probably more ignorant than you think you are. You might make money anyway, but that will probably be thanks to luck – not your brilliant insight.
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2. Mistaking industry expertise for stock insight
Last year, I wrote about my college friend Simon, who was a big-time IT whiz. So naturally, 22-year-old me asked Simon what he thought about computer stocks.
Simon recommended a company called Zeos International, an up-and-coming computer maker in the early 1990s. It was growing fast and offered round-the-clock customer service (an innovation at the time). The clincher for me was that Zeos was a big advertiser in the many computer magazines that Simon read.
So I bought shares of Zeos, instead of, say, Dell. It was my first million-dollar mistake.
But buying a lot of ad space and being an industry darling didn’t translate into corporate success… or a rising share price. It turned out that Zeos made lousy computers. And Zeos went to zero with a few years.
Simon had good insight on the dynamics of the computer industry. But he didn’t have any insight about stocks. They’re two very different things… and sometimes, too much expertise can hurt actual insight on stocks.
3. Thinking that someone else has my best financial interests in mind
Recently, a guy I had just met was talking about money: “Oh, I have a personal banker… and I get all the information I need about markets and investing from him, and he helps me invest.”
So I asked him what his returns were last year.
The guy answered, “I don’t know. But I know that he’s doing everything he can and giving me the best advice out there.”
It amazes me that there is anyone who doesn’t understand that the only person you should rely on to look after your money, and your financial future, is yourself. (This is one of the reasons I started Stansberry Pacific Research.)
The financial-industrial complex – the financial media, private bankers, so-called trading gurus and all the rest of them – wants to “help” you take care of your money.
But their “help” often enriches them, far more than it enriches you. And if you let them, they might leave you completely ignorant… and poorer.
So if you want to make sure your finances are well looked after, then by all means do get input from a professional. But remember that it’s you who is accountable for your own money – and you should be overseeing everything about your own money.
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4. Feeling badly about money
The world is made up of people with nothing – people who are desperately poor and sick and suffering. Like many others, I try to help people in need where and how I can. I hate the inequality of it all… and I feel badly for the billions of people on earth who have almost nothing.
But that doesn’t mean that I don’t like money… or that I feel that money, or having money, is bad.
You see, if you believe on some level that money – and being rich – is “bad,” there’s a voice in your head that’s going to stand in your way of ever having much money.
Of course, for a lot of people, money isn’t important. They have other goals in life – finding the perfect wave or eating their way across Asia – that don’t require much cash. And that’s fine.
But if you’re not like that, and if you want money, don’t get in your own way.
We’ve written a lot about how your emotions can get in the way of making good investment decisions. But not liking or being afraid of money is probably the biggest barrier to wealth of all. And it’s one you might not even recognise.
Publisher, Stansberry Pacific Research