Personally, I have just one rule: Avoid big mistakes.
If I do that, I know I'll be fine. I know I won't "blow myself up" in my investments. Knowing that gives me peace.
I can't believe how many brilliant, successful people fail to do this one simple thing... and lose what they have... or even lose everything.
Look, if you do nothing else, remember this: Avoid big mistakes. And the biggest of the big mistakes is STILL DANCING when the music stops.
Get the heck out of there, my friend! If you're a little late to realize it, then STILL get out. Better late than never. Let me show you what I mean...
Chuck Prince, the former CEO of Citigroup, is a perfect example of a guy who kept on dancing...
In the summer of 2007, just as the banking crisis was getting underway, Chuck actually told the Financial Times he was "still dancing."
About the banking business, Chuck said, "When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing."
But the music had already stopped when he was speaking. Shares of Citigroup are down 93% since he said that... just a year and a half ago. And Chuck lost his job less than four months later.
I've also seen it close to home...
Most of the wealthy investors where I live made their fortunes in local real estate – that's Florida real estate.
The music stopped in Florida real estate a few years ago... But even today, they're STILL dancing. If they had acknowledged the music stopped early, they might have been able to keep much of their wealth.
I could go on, with examples throughout history... from Sir Isaac Newton in the 18th century South Sea Bubble to George Soros in the 2000 tech bubble.
The message today is incredibly simple...
When the music stops, STOP DANCING.
Get off that dance floor... and do it fast. Do NOT allow small mistakes to become big ones.
It sounds simple. But as I briefly showed, even the smartest people succumb to it.
We are all vulnerable to the risk. So you must make a conscious choice here... you must tell yourself you will never let a small loss become a big one.
You can use whatever "system" works for you to reinforce this idea: stop losses, trailing stops, NOT averaging down a losing position, NOT taking too big a position in anything.
I actually use all of the above.
Whatever works for you, do it. The important thing is, do NOT let a small loss become a big one.
Want to be just fine, forever, in your investments? Then don't forget my one rule... Avoid big mistakes!
A huge concern facing anyone who owns precious metals – and anyone who has even $1 in the markets – is whether we're headed for inflation or deflation. Check out Chris' take in An Answer to the Biggest Question Investors Face Right Now.
For folks holding lots of euros in the bank, 2010 has become "the year of watching my savings disappear."
When looking for stocks, commodities, or currencies to bet against, market expert Dennis Gartman recommends targeting assets that exhibit weak price action compared to their peers. This is like "throwing rocks into a wet paper sack," according to Dennis.
Right now, mark the euro down as the "wet paper sack" of the currency complex. We identified the euro's "1-2-3 top" back on December 16th. Just after that piece, the euro plummeted to the $1.42 level. It then staged a brief relief rally before heading back down.
Lately, the euro has fallen nearly every day with no support whatsoever. Currency traders: Here's your wet paper sack. Currency holders: Here's another reason to keep a good portion of your savings in gold.
How You Can Get Paid by a "Gold Bank" Today By Matt BadialiThursday, February 4, 2010
Starting in 1985, Franco helped finance some of the biggest gold mines discovered in the past few decades. Many investors doubled their money in one year. Lassonde and Schulich made hundreds of millions of dollars.
When This Crisis Will End By Dr. Steve SjuggerudWednesday, February 3, 2010
The good news here is that we may already be out of the woods... Stock prices and home prices have been recovering for months. And unemployment has leveled off in the 10% range.
The Great American Liquidation Sale By Tom DysonTuesday, February 2, 2010
These companies based their business models on optimistic assumptions of the future. Conditions have changed, and now these businesses are basically giant portfolios of dud investments. They're going to have to liquidate these investments and slash the scale of their businesses.
How to "Bank" Dividends Whether or Not the Economy Recovers By Tom DysonMonday, February 1, 2010
One of the benefits of timberland is, if the price isn't right for timber, or if there isn't much demand, you don't have to cut your trees down. You just let them grow bigger and taller. As they say in the industry, you "bank it on the stump."
