You might feel like any failure you have is the result of malevolent forces outside of your control.
But it’s my job to tell you the truth – and the truth is, you are the sole possessor of your own success and failure as a commodity investor.
Yes, as an investor in general, the government is hostile to you. And you’re up against professional scam artists in the financial industry who will wring you out for every penny of your net worth if you let them.
But the government can’t force you to buy bad investments or to sell good ones. The financial industry doesn’t literally kick in your door and tear your money from your hands.
The biggest causes of your failure are your own decisions or indecisions.
In the next few weeks, you’re going to get inundated with messages from the financial industry that it’s time for you to turn over a new leaf with the New Year.
It’s time to buy investments because the calendar is changing!
If that statement doesn’t send you running for the hills, then you need to take a long hard look at your investment plans.
What are your plans? Do you have a plan?
If you can’t describe your plan in a sentence or two, then you have no chance of succeeding. That’s not because I’m saying you’re stupid or lazy.
It’s just a fact: without a plan for success, there’s no practical way to tell if you’re succeeding.
Make a simple plan, be as specific as possible, and then ignore anything that doesn’t help you achieve that goal.
If you take these simple steps, you’ll never get duped by a penny-stock scam. You’ll never be blindsided by a new government regulation or tax.
And then, when you do achieve success, you’ll be able to proudly give yourself credit – instead of looking for someone else to blame for your lousy decisions.
If my words sound like “tough love” – they’re not! I’m simply telling you the only way I know how to succeed as an investor.
As an addendum, the biggest single distinction you MUST start to make with your financial decisions is to realize the difference between an investment, a cash position and a speculation.
Cash is simple. It’s the most liquid form of wealth – a stable store of value that’s easily deployed to buy other assets. Whether it’s gold, silver, the dollar, the euro, the yen – or any other highly recognized, easily bought and sold money unit – cash is the best way to make sure you can buy things easily and quickly.
It doesn’t produce a yield. It can’t make you rich. And you should always have some on hand for emergencies, and/or in the bank and in your brokerage account for big purchases.
A speculation is something else entirely. It’s an asset you buy now because you think it will fetch a higher price in the future. It’s purely educated guesswork whether you’ll be right or not. Speculations should give you a chance to greatly impact your net worth if you’re right, and not impact you much at all if you’re wrong. Think biotech stocks, junior precious metals stocks and other high-risk, high-reward types of situations.
I know some of you are going to hate my definition of investment – but I find it to be the most useful. Lots of people make the mistake of calling ANYTHING they want to buy “an investment.”
So a new car is an investment, because you need a safe way to get to work. A house is an investment because it’s better than renting – you’re building “equity.”
Or a new outfit is an investment, because it makes you feel good, and you need to feel good about yourself to succeed, etc.
In this manner, ANYTHING can be called an investment. So the word loses all meaning.
My definition (and value investing legend Benjamin Graham’s definition): an investment is a business or other venture that returns regular cash payments to you over a period of time.
You own an investment, and it pays you to own it. It’s relatively safe, it produces income and if you hold it long enough, you’ll make back more than you put into it from the regular cash flow it gives back to you.
If you look at stocks through this prism, then you would never buy a penny stock without a dividend and call it an investment. Even many dividend stocks might not be appropriate, either because they’re too risky or their dividend is too small.
But if you can compartmentalize these different types of financial assets, and make sure that you’re using the right one for the appropriate time as it fits into your plans, then you are much less likely to go wrong.