hey guys,
i see the same themes coming up over and over and thought id share an analogy which i think makes it easier to understand the whole courting / relationship process.
the analogy is that of the stock market. the same philosophies you'd hold towards your investments are the same philosophies you should hold towards women. i'll explain...
there are three basic types of stocks that are like women..
1) the blue chip stock
2) the speculative stock
3) the run of the mill stock
Blue Chip Stocks
blue chip stocks are stocks that have an established market, make a ton of money and basically it would take a global disaster to hurt them. Phizer, Coke, Nike, Exxon, etc. are blue chip stocks. they aren't going to double in a year, but they typically return you 10% + every year for decades. sometimes they have a few years of flat growth or might even dip a tad, but 1) the odds of you losing your investment are practically nill and 2) in the long run they bring you a good return. some people don't like blue chips because they aren't 'exciting' stocks to hold, but they are a wise investment.
the blue chip woman: this is the 'quality' woman. she's got a level head, she's predictable, she treats you well, etc. she does not have mental retardation (as Borat would say). you might thing blue chip women are common, but they actually aren't. and a lot of them go unnoticed because they don't attract a huge amount of attention the way a speculative stock does.
Speculative Stock
speculative stocks are the "high growth" stocks. high growth stocks just means 'get rich quick' stocks. it also means 'lose all your money quick' too. these are stocks that are usually in debt, trying to be the winner in an emerging market that doesn't have a lot of revenue yet, etc. Basically because the future of these stocks are so unknown, and theres a real chance they might go belly up, investors who take the risk get the rewards - they also pay the price if the stock falls apart. Speculative stocks typically have a lot of buzz around them - afterall who wouldn't want to double their money in 3 months. these are sexy, exciting stocks - although smart investors seem them as a more of a gamble than an investment. speculative stocks often times are only worth as much as the 'gamblers' in the market are willing to bet. so key to their valuation is to drum up a lot of 'irrational exuberance' over their future potential.
the speculative woman: the speculative woman, on the surface, is very appealing. she's hot, she's wild, she's your 'oneitis'. but guess what, she's a gamble, a big one.
the run of the mill stock
most stocks are run of the mill. they are for companies that have an established market, product and revenues. they aren't big enough or consistent enough to be blue chips, but depending on market variables they can have years of good growth. they are more difficult to assess than blue chips, but much easier to assess than speculative stocks. while blue chips are fully matured businesses, and speculative stocks are fully immature businesses, most stocks are in the middle (they aren't going to go belly up, but how quickly they mature is anyones guess).
the run of the mill woman: the run of the mill woman is attractive, fairly level headed, but will have bouts of typical woman behavior. she's your average stock. you won't lose everything being with her, but there will be ups and downs.
So, in any given situation you have to ask yourself, what kind of woman am i dealing with here, and does it fit with my investment strategy.
there are three major mistakes investors make.
1) not knowing what kind of stock they are holding (and hence having unrealistic expectations of the stock)
2) selling to early
3) holding to long.
if you buy blue chips, don't expect excitment, expect consistent returns.
if you buy speculative, expect the stock to fluctuate wildly and know before hand how strong your stomach is for that ride.
if you buy an average stock, expect peaks and valleys.
now the big question, when to buy, when to sell.
if you're invested in a blue chip, you should never sell. if you invested in this kind of stock you did so because you want consistent returns year after year. if you buy a blue chip expecting it to double then you've made mistake #1. the valleys / dips in a blue chip are very shallow, even the biggest sissy should be able to ride them out. if you're ditching a blue chip stock because its not growing at 30% a year, then you're an idiot.
if you're invested in a speculative stock, when to buy and when to sell is critical. you should never invest in a speculative stock with money you aren't prepared to lose. if you go in with that mentality, then you're much better off. speculative stocks have huge peaks and valleys, when they take off, they take off fast. when they plummet they plummet fast. you can stay in until you lose everything, or quit after you take a 50% loss. if you are in a speculative stock and after losing 5% you want to sell, you're an idiot and you picked the wrong stock for your investment profile. if you buy 10 speculative stocks, odds are 8 of them will fail miserably. so unless you can afford to lose that money, stay away. the good thing is that if you have the temperment, the 2 that succeed can make up for the losses you take on the other 8. for speculative stocks if you lose 20% thats nothing, dont sell, but if you lose 50%, you should sell - perhaps buy back after the stock has bottomed out.
if you're invested in the run of hte mill stock you will always have to be taking the temperature of the market. blue chips dont require much assessment, and speculative stocks are near impossible to assess accurately, but average stocks you can assess with a little work. when to buy and when to sell will depend on how well you assess the stock.
look at a company like Nortel. they were $100+ dollars a share. then they crashed to under $1 a share. because people believed the 'hype' and invested emotionally, a lot of people rode that stock down all the way to the $1 mark. if they had any brains they would have held as it sank to say $90 then sold - cut their losses. Nortel is like the hot sexy slut that everyone wants to f*ck, until folks find out she has an STD, and then no one wants to touch it.
dating, f*cking and having a relationship with a chic is just like investing. there are different kinds of chics, and different investment strategies that have to be applies. nothing wrong with taking a BIG risk, IF you can stomach the roller coaster ride and potentially losing all your money.
A lot of guys out there want the 'get rich quick' stock, ie. they want "the one" - they want the excitment of the big win. and thats fine, BUT, if deep down what you want are solid returns year after year, then what you really need is the blue chip woman.
anyway, the point of this thread is to say...
1) invest in what will give you the returns you want at the risk level you can tolerate (be honest with yourself about the returns you are looking for)
2) know when to sell and when to buy
3) DO NOT let your emotions decide when you buy or sell a stock.
4) always be open to reassessing your portfolio plan. the stock you like at 16 will be different than the one you like at 30.
5) if you go into high risk stocks, dont whien and complain when you lose your money.
6) if you're stock is fluctuating heavily (assuming its not a speculative stock) reassess whether you should be invested in it. Something is wrong if your blue chip stock suddenly loses 10% of its value. but for a run of the mill stock, 10% may not be a big deal, but if it loses 25% then something is wrong. when you see the signs of trouble, start assessing your investment and whether you should keep your money there.
7) SELL SELL SELL IF... you are being lied to! you wouldn't invest in a business that lied about how much money it was making would you?
8) Judge a stock on how it performs, not on how it says it will perform. every company out there will say its future is bright, but whats the bottom line like? are people buying its product, is it making more money quarter over quarter or are its losses getting bigger?
9) always remember, ITS YOUR MONEY and you can do what you want with it. you don't have to be invested in anything you dont want to be invested in.
10) mistakes are going to happen. nothing wrong with making a mistake, in fact you should expect that not every stock you invest in will do well. you can learn from your mistakes and that will make you a better investor. DO NOT cry in your milk all day just because you made a bad investment and lost some money - its all part of the game.
and if you dont like the rules of the game, then don't play. there's nothing wrong with just saving your money up in your bank account for a while until you are ready to invest.
J
i see the same themes coming up over and over and thought id share an analogy which i think makes it easier to understand the whole courting / relationship process.
the analogy is that of the stock market. the same philosophies you'd hold towards your investments are the same philosophies you should hold towards women. i'll explain...
there are three basic types of stocks that are like women..
1) the blue chip stock
2) the speculative stock
3) the run of the mill stock
Blue Chip Stocks
blue chip stocks are stocks that have an established market, make a ton of money and basically it would take a global disaster to hurt them. Phizer, Coke, Nike, Exxon, etc. are blue chip stocks. they aren't going to double in a year, but they typically return you 10% + every year for decades. sometimes they have a few years of flat growth or might even dip a tad, but 1) the odds of you losing your investment are practically nill and 2) in the long run they bring you a good return. some people don't like blue chips because they aren't 'exciting' stocks to hold, but they are a wise investment.
the blue chip woman: this is the 'quality' woman. she's got a level head, she's predictable, she treats you well, etc. she does not have mental retardation (as Borat would say). you might thing blue chip women are common, but they actually aren't. and a lot of them go unnoticed because they don't attract a huge amount of attention the way a speculative stock does.
Speculative Stock
speculative stocks are the "high growth" stocks. high growth stocks just means 'get rich quick' stocks. it also means 'lose all your money quick' too. these are stocks that are usually in debt, trying to be the winner in an emerging market that doesn't have a lot of revenue yet, etc. Basically because the future of these stocks are so unknown, and theres a real chance they might go belly up, investors who take the risk get the rewards - they also pay the price if the stock falls apart. Speculative stocks typically have a lot of buzz around them - afterall who wouldn't want to double their money in 3 months. these are sexy, exciting stocks - although smart investors seem them as a more of a gamble than an investment. speculative stocks often times are only worth as much as the 'gamblers' in the market are willing to bet. so key to their valuation is to drum up a lot of 'irrational exuberance' over their future potential.
the speculative woman: the speculative woman, on the surface, is very appealing. she's hot, she's wild, she's your 'oneitis'. but guess what, she's a gamble, a big one.
the run of the mill stock
most stocks are run of the mill. they are for companies that have an established market, product and revenues. they aren't big enough or consistent enough to be blue chips, but depending on market variables they can have years of good growth. they are more difficult to assess than blue chips, but much easier to assess than speculative stocks. while blue chips are fully matured businesses, and speculative stocks are fully immature businesses, most stocks are in the middle (they aren't going to go belly up, but how quickly they mature is anyones guess).
the run of the mill woman: the run of the mill woman is attractive, fairly level headed, but will have bouts of typical woman behavior. she's your average stock. you won't lose everything being with her, but there will be ups and downs.
So, in any given situation you have to ask yourself, what kind of woman am i dealing with here, and does it fit with my investment strategy.
there are three major mistakes investors make.
1) not knowing what kind of stock they are holding (and hence having unrealistic expectations of the stock)
2) selling to early
3) holding to long.
if you buy blue chips, don't expect excitment, expect consistent returns.
if you buy speculative, expect the stock to fluctuate wildly and know before hand how strong your stomach is for that ride.
if you buy an average stock, expect peaks and valleys.
now the big question, when to buy, when to sell.
if you're invested in a blue chip, you should never sell. if you invested in this kind of stock you did so because you want consistent returns year after year. if you buy a blue chip expecting it to double then you've made mistake #1. the valleys / dips in a blue chip are very shallow, even the biggest sissy should be able to ride them out. if you're ditching a blue chip stock because its not growing at 30% a year, then you're an idiot.
if you're invested in a speculative stock, when to buy and when to sell is critical. you should never invest in a speculative stock with money you aren't prepared to lose. if you go in with that mentality, then you're much better off. speculative stocks have huge peaks and valleys, when they take off, they take off fast. when they plummet they plummet fast. you can stay in until you lose everything, or quit after you take a 50% loss. if you are in a speculative stock and after losing 5% you want to sell, you're an idiot and you picked the wrong stock for your investment profile. if you buy 10 speculative stocks, odds are 8 of them will fail miserably. so unless you can afford to lose that money, stay away. the good thing is that if you have the temperment, the 2 that succeed can make up for the losses you take on the other 8. for speculative stocks if you lose 20% thats nothing, dont sell, but if you lose 50%, you should sell - perhaps buy back after the stock has bottomed out.
if you're invested in the run of hte mill stock you will always have to be taking the temperature of the market. blue chips dont require much assessment, and speculative stocks are near impossible to assess accurately, but average stocks you can assess with a little work. when to buy and when to sell will depend on how well you assess the stock.
look at a company like Nortel. they were $100+ dollars a share. then they crashed to under $1 a share. because people believed the 'hype' and invested emotionally, a lot of people rode that stock down all the way to the $1 mark. if they had any brains they would have held as it sank to say $90 then sold - cut their losses. Nortel is like the hot sexy slut that everyone wants to f*ck, until folks find out she has an STD, and then no one wants to touch it.
dating, f*cking and having a relationship with a chic is just like investing. there are different kinds of chics, and different investment strategies that have to be applies. nothing wrong with taking a BIG risk, IF you can stomach the roller coaster ride and potentially losing all your money.
A lot of guys out there want the 'get rich quick' stock, ie. they want "the one" - they want the excitment of the big win. and thats fine, BUT, if deep down what you want are solid returns year after year, then what you really need is the blue chip woman.
anyway, the point of this thread is to say...
1) invest in what will give you the returns you want at the risk level you can tolerate (be honest with yourself about the returns you are looking for)
2) know when to sell and when to buy
3) DO NOT let your emotions decide when you buy or sell a stock.
4) always be open to reassessing your portfolio plan. the stock you like at 16 will be different than the one you like at 30.
5) if you go into high risk stocks, dont whien and complain when you lose your money.
6) if you're stock is fluctuating heavily (assuming its not a speculative stock) reassess whether you should be invested in it. Something is wrong if your blue chip stock suddenly loses 10% of its value. but for a run of the mill stock, 10% may not be a big deal, but if it loses 25% then something is wrong. when you see the signs of trouble, start assessing your investment and whether you should keep your money there.
7) SELL SELL SELL IF... you are being lied to! you wouldn't invest in a business that lied about how much money it was making would you?
8) Judge a stock on how it performs, not on how it says it will perform. every company out there will say its future is bright, but whats the bottom line like? are people buying its product, is it making more money quarter over quarter or are its losses getting bigger?
9) always remember, ITS YOUR MONEY and you can do what you want with it. you don't have to be invested in anything you dont want to be invested in.
10) mistakes are going to happen. nothing wrong with making a mistake, in fact you should expect that not every stock you invest in will do well. you can learn from your mistakes and that will make you a better investor. DO NOT cry in your milk all day just because you made a bad investment and lost some money - its all part of the game.
and if you dont like the rules of the game, then don't play. there's nothing wrong with just saving your money up in your bank account for a while until you are ready to invest.
J
