How not to lose money on stocks?
Who has never suffered losses with some type of investment that throws the first stone. And when we think of losses, one of the first investments that comes to mind is stocks . But after all, is there any way to prevent such tragic events from occurring during our life as an investor ? In search of the answer to this question I will follow the advice of one of the greatest investors of all time, Mr. Charlie Munger , and invert the logic of the question, answering then: How to lose money with stocks?
How to lose money on stocks?
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Want to get rich right away
I will be as anxious and miserly as possible, I will seek exorbitant gains in the hundreds. I'll leave the smallest gains, in the units square, to the losers. I will do everything in a hurry, because time is money and life is a race to the top.
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Take advice from the wrong people
I will not seek advice from anyone, as I know more than the vast majority. In fact, I won't waste time on that, as I'm very busy. If the board wants to come to me that's fine, but I won't come to them. And when advice comes, I'll only take it if it comes from someone who earns a commission for it.
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Let emotion win over reason
The heat of emotion will be my guide to investing. When there are good winds and no sign of storm ahead I will keep heading north. However, when turbulent days come to me, I will act prudently and maneuver to escape the storm, thus becoming immune to storms.
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Pass the key to the safe to strangers
I have to concentrate on my work, which consumes all my time and energy, consequently I have to delegate the management of my assets to someone else. He will be someone of my complete confidence, consequently, I will free myself from the arduous task of supervising his work.
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do not seek knowledge
Investments have a life of their own and, regardless of what I do, their prices and yields will not change, therefore, I will not waste time seeking understanding and will delegate this tedious function to those who advise me.
We have created a veritable recipe for disaster above. And it is from this scenario of total destruction that we will pave our way to the "promised land" and answer the question:
How not to lose money on stocks?
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work diligently
Don't be in a hurry to build your assets , don't use your capital in improbable gains and whenever you use your money in an activity ask yourself: What return will I get if everything goes well? What return will I get if everything goes wrong? Which of the two is bigger?
Be as meticulous as possible and if you don't have time to analyze an investment properly, don't invest . After all, failing to win is preferable to losing.
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Take advice from the right people
If you get sick, see a doctor, if you want to build a house, look for an architect, if you want a jewel, go to a goldsmith. Similarly, if you want to get rich, get advice from someone rich. We all have someone we know, someone we recognize as having a level of life we would like to have, why not get advice from that person? I'm sure she'll be eager to share some inspiring stories.
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work with conscience
Know what you are doing and where your money is being spent . The best advice I've ever heard in this regard is this: "If you can't explain to a 10-year-old what you're doing and what your money is being used for, most likely you don't know what you're doing."
Additionally, know what you are going to do even before the events occur. Write in a journal what attitudes and actions you will take in these three possible scenarios: optimistic, realistic, and pessimistic. Spend some time creating an emergency procedure, because when the turmoil hits, time and psychological pressure will be your biggest enemies.
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Keep safe keys in a safe place
You can be the hardest working and most honest person in the world, you can even create an empire , but if the keys to the safe end up in the hands of strangers, your efforts will be in vain. The reason behind this is simple: money easily corrupts people.
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seek knowledge
Personal growth cannot be delegated to third parties, and there is only one way for you to earn more : it is for you to become more.