Every investor, makes this devastating mistake at
some point usually early in their investing lives
not only can it be difficult to recover from for most it results in a scarring conclusion to their adventure into the otherwise
potentially lucrative world of investing this huge mistake and how to avoid it
coming up...
I am so glad you're here i really do enjoy our time together
by, watching this channel, you'll be gradually building your rapidly growing, highly, diversified
net worth one video at a time. On january 1st, 2016, I went off on my own. I was officially
investing full-time, before that point, when there was no pressure—when stock research
was just something I would do in my spare time—I'd been successful at
identifying high-quality, undervalued stocks in which to invest. But once that was my full-time
gig, I felt like I needed to do more, like I needed to identify more
opportunities than the four or five stocks I was finding
each month. So I sought help
from others. I paid for several monthly stock selection subscriptions. I constantly
had CNBC playing in the background. I started
listening to others to find and implement investment ideas.
Sometimes these ideas played out as expected. Sometimes, of course, they didn't. And then there
was that one time—and this is what set me straight—one time the trade went
horribly wrong. My position was crashing. I was bleeding money. I didn't know
what to do. I was actually able to find a clip,
a recording of some of whom I can only
assume is going through a similar situation. It at least does a good job at capturing that
consuming panic that you might feel. As you watch this clip, consider if you've ever found yourself in a similar position—
tackling similar emotions. Let me know in the comments.
Here's that recording...
WHAT'S HAPPENING!!!
It's hard to watch, isn't it?
It's even harder to live through. Well, you don't have to.
So what happened? What was the difference between my pre- and post-
2016 success and that brief stint where I experienced several
overwhelmingly stressful trades? I stopped relying on myself and on my
own research and conclusions. I stopped playing out every possible scenario in my head before entering a trade.
I started
relying on others.
I just, want to check on my investment I made on Friday. Yeah, zero balance as of this morning... I don't know
what that hot tip was, but you'd have been better off putting that money in a coffee can.
Hi, Walter. This is Kenneth Parcell, NBC Page Program, what's the status of my investment?
And that was my crucial mistake. I've since repented
and recovered, but this is a lesson that almost every investor learns the hard way at
some point. It is dangerous to rely exclusively on others investment ideas!
Why does this happen? How do investors find themselves in positions they
don't fully understand and an emotional wreck when those bets, don't play out exactly as expected?
It starts with the fact that we're surrounded by so many
experts...
professionals or not, who are more than happy to share with you the next hot thing. They
want you invested in there too, maybe because they
like you ...or maybe because they get some sort of validation out of it. Whatever their motivation, think
about all the influences you have in your life trying to give you those recommendations.
You have the screaming heads on tv: "This is it!"
"I'm going over the top right here. BUY! BUY! BUY! BUYBUYBUYBUYBBBBBUUUY!!! I am buying the market"
"Right here, right now, cuz I know more than anybody!" The well-spoken,
experienced or
professional trader: "You mean to tell
me, that if I put you in Union Carbide at a 7 and took you out at 32..." "Texas Instruments at 11 and took
you out at 47..." "US Steel at 16, took you out at 41..." "...you wouldn't be saying to me, right now,
Chester pick me up a few thousand shares of Disney, on the spot, right now... come on..." "I mean, honestly Kevin, honesty..." And the wise
successful friend or associate: "Here's the pitch...
Wind power.
Bandwidth.
Chinese market." "Oh God..." "Just think this time next, year
you'll be so rich you can run for political office without having to pretend to be a fundamentalist!" It's okay to have someone you trust
give you ideas, but it is dangerous to invest in those ideas without any further
consideration or
access to information.
It is a viable strategy to hear them out and then—and this is the essential part—do your own research
to supplement their investment thesis and come to your own
educated conclusion. I get it; there are countless
investment opportunities in the world, and if it's not what you do professionally and it's not your passion, that can be an impossible
mountain to sift through.
But the ideas you hear from others need to be the start of your investment process not the end!
Alternatively, if you have
full access to when and why that
person-you-trust makes each and every trade—so you know when they're entering, exiting,
increasing, or decreasing their
own positions—that too could be a viable strategy for you. I'm reminded of a young professional investor, who,
while stranded in an airport, had a brief chance encounter with
his lifelong investment role model. They began discussing their current theses on different markets.
One in particular stood out to this novice investor. It was a trade made by the veteran that
was the exact opposite of his own.
Before he could ask for more information, the seasoned trader was boarding
his flight. This weighed heavily on the young pro; he didn't like
betting against his investment hero. He decided that he—the young
one—must have missed something. So he reluctantly flipped his position. He trusted the veterans opinion.
The next day he suffered a significant loss in that position before pulling out.
Turns out the young professional had been right. It's too bad he doubted his own research. It appeared
as though the old pro had lost his touch.
Later that week, he received a call from the veteran asking how
he was doing. the young trader explained that he was a little upset after the loss and expressed concern for the veteran
because he knew that the veteran's bet had been much more significant. The old professional was confused.
He told him that he had made money on that position every step of the way. In the few
hours after they had spoken in the airport, the market moved exactly as he had anticipated.
Then his research suggested that it was about to go the other way, so,
unbeknownst to the young investor, he profitably switched his thesis,
and consequently his position.
The young professional was trading on an entirely different time horizon than the veteran.
He didn't have access to ALL the information and his portfolio
suffered for it. One of my best friends is this way: he knows my track record, and he constantly
wants to know the specific
stocks that I've identified as having 100% or more potential return. I've always been hesitant to share...
Not because I don't want him to profit from them, but rather because he doesn't know exactly
when my research might indicate that I make a change to that position and I don't want to forget to tell him.
Because it could be a couple of years from now, but it could be hours from now.
That's why I cringe when I see people investing their hard-earned cash
without any more than a hot, at least for now, tip to guide them.
What should they do next? That's an important part of any investment decision. That's actually one of the main reasons I started my Patreon account.
So that I could provide that friend—and anyone else interested—with real-time updates. So you know
exactly when and why I make every single move. So whenever you hear the next good idea—and
inevitably you'll hear one—whether it comes from me or Jim Cramer or your best friend—I don't care how
amazing
and urgent it sounds—do not invest while relying exclusively on
someone else's tip. Do your-future-self a favor and either dedicate the time necessary to research and come to your own
educated conclusion or
make sure you have open,
ongoing access to ALL the information.
Do you have a story like this? Where you, or someone you know, followed blindly someone else's advice, and it didn't turn out so well?
If so, I hope you didn't lose too much! But I'd love to hear
about it, because we can all learn from it.
Let me know in the comments. And if this is your first time here, I hope you click subscribe and then that
notification bell, so you can join us on this journey
to build your rapidly-growing,
highly-diversified net worth! I want to thank you for watching!
I sincerely look forward to spending more time with you in the next video...
Take care.