I made a wise financial decision once, then I made a stupid one. I decided to sell our 48 shares of Unocal Stock and buy Best Buy stock. Within three weeks, my portfolio had grown nearly 30%. Wow, how easy is this? Within three months it was up nearly 50%. (Donald Trump watch your back!) Within 6 months it was worth only 1/3 what I paid for it. So what did I do? I'm no fool, I bought more. Doubled my shares. I was 'dollar cost averaging' or so the Motley Fool Website said.
Within 2 more months it was worth just over half of what I paid for the second purchase. Ouch! Those Motley Fool Guys are Idiots! I've gotta get out of this, it's killing me! But I can't sell now, I'll lose all my $$, so I decide "If it ever gets back up to where we can recoup our investment, I'll bail!" Four long years later it happened. What a glorious day! I called the broker and said "Sell it quick!" Then, of all the audacity, he suggested that I 'wait a bit to see what it is going to do'. No. Sell it...all...now. Less than 30 minutes later it was done, and not only did I get my $ back, I actually made about $200!Within a couple of months the stock (which no longer belongs to me mind you) is worth what my original investment was, then it doubled, then it doubled again, then it split, then it doubled, then it split...over and over again for the the next 5 years. Just to torture myself, I figured it up, if I had held on to those shares, through splits & run ups, and sold at their peak, I'd have made about $80,000. But I brilliantly, loudly, and proudly, settled for $200 and some knowledge.
So, what did I learn from this? I learned that I am not going to spend enough time studying the stock market to make wise stock market decisions. I learned that I'm far better off to sub-contract that job out to someone who will. A specialist. A 'financial advisor' whose job it is to know which industry sectors are doing well, and which ones aren't, and which Mutual Funds are well managed, and which ones aren't. So, every month [remember dollar cost averaging] I put a little more $ in a boring mutual fund. And guess what? Over the last 2 years, when general stock market has lost about 43% from it's high I am down 9%. Why? Because I didn't try to do it myself, I hired a specialist. Sounds like an ad for Merril Lynch huh? Not really, I have lost 9%. Even a specialist, who studies the market daily, can't guarantee certain results. Like with medicine or education, the best doctor in the world may not be able to cure your cancer, and the best teacher in the world may not get you an A in Pre-calculus.
My financial advisor is fond of saying "A rising tide lifts all boats", well it seems the opposite is also true. Today Forbes posted it's list of the world's Billionaires. Subtitle of the story was: Last year the world had 1,125 billionaires. Today there are 793. In fact, the two richest men in the world lost a combined $43 Billion! [which, by the way, is more than the individual GDP of the bottom 115 of the worlds 190 nations!] If I do the math right, they lost a greater percentage than I did...The moral of the story? If you know what you're doing you stand a much better chance of succeeding, but that still doesn't guarantee returns.
...the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all. Ecclesiastes 9:11
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