Fixing My Big Investment Mistake This Year
By Dr. Steve Sjuggerud
May 27, 2008
Today, I'll share with you the biggest mistake I made this year.
I didn't follow the "secret." It's a simple secret. And I should have known better.
This secret is important... It is the only way I know for you to really make ridiculous gains from investing without taking on crazy risks. The man I first heard the idea from actually did make ridiculous gains following it...
Jim Rogers made more than 4,000% in his Quantum Fund in the 1970s, when the overall stock market only rose 47%. (Then he retired in 1980, at age 37.)
Jim's track record when he ran the Quantum Fund may be the best of anyone, ever. He was interviewed after he retired for a book called Market Wizards (which first came out in the late 1980s). In that book, he said something that has stuck with me since:
Markets often rise higher than you think is possible,
and fall lower than you can possibly imagine.
This was a revolutionary idea for me, at the time – a true "secret" to ridiculous gains.
Using his own secret, Jim Rogers could have bought oil at $13 a barrel a few years ago, and he could still be holding it at $130 a barrel today. Your typical investor would have sold somewhere along the way. But not Jim.
(If anyone actually did buy at $13 and hold to $130, it was probably Jim. He started his Rogers Commodity Index Fund back in 1998, when oil bottomed, and he's still a commodities bull today.)
In the mid-1990s, Jim and I sat next to each other at a black-tie dinner. We talked for hours. He struck me as one of the most original thinkers I'd met. After that dinner, I went back and re-read his chapter in Market Wizards.
I realized his quote, "Markets often rise higher than you think is possible, and fall lower than you can possibly imagine" was incredibly powerful. Once I adopted it, it allowed my readers to make huge fortunes...
The most recent huge winner is Seabridge Gold. I recommended shares of Seabridge at $2.64 to my subscribers a few years ago. Today it's up to $23. We knew the markets could go higher than we imagined, so we didn't get out too early. I might not have had the conviction to hold it that long without help from Jim Rogers.
Jim Rogers' quote has made me – and my subscribers – large amounts of money. But this year, my biggest mistake was forgetting the other half of the quote: Markets can fall lower than you can possibly imagine.
Banks and homebuilders – two things I believe are cheap and hated – have fallen lower than I could have possibly imagined. I bought in too early. I thought I saw a glimmer of an uptrend. So far I've been wrong. Jim's rule was right, as always. So right now, I'm watching my trailing stops closely on these.
If you want to make a whole lot of money investing, you have to stick to your rules. Jim Rogers' rule is one of the most difficult to stick with... but it is one of the most profitable.
Oil moving up 900% is a great example of the market rising higher than you think possible. And financial stocks and housing, unfortunately, are a good example on the downside.
"Markets often rise higher than you think is possible, and fall lower than you can possibly imagine."
This rule will make you a lot of money. And both halves of the rule are equally important.
Good investing,
Steve
Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.
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