"Investing is like a journey without direction,
From one torture to another.
Neither is there an end to the journey,
Nor the torture.” Jagdish Gupta, Indian philosopher
Or something like that.
Actually, Jagdish Gupta penned the above beginning with the word “Love” not “Investing”, but I think the altered verse is just as appropriate.
"Investing is like a journey without direction;" could be a true statement for a huge number of individual investors. "Without direction" are the key words in this line. Too many individuals throw their hard-earned money at the stock market; hopelessly attempting to duplicate the supposed successes yakked about at the company water cooler. Directionless investors are susceptible to confusing oversimplified and boiled down media sound bites with unbiased management assessments. "Without direction" must include the vast majority of investors lacking a simple overall investment portfolio strategy. I would agree that investing is like a journey, but it should never be "without direction".
"From one torture to another;" can accurately describe some investor's experiences. Wall Street has many ways to torture investors, and seems to invent new ones almost daily. Day trading, options speculating, hedge funds, arbitrage and straddles can be as torturous to ones financial health as a trip the lowest levels of a Middle Ages castle. Rather than wandering around Wall Street, hoping not to fall into a dungeon of high-tech gibberish, I strive to comprehend why a specific stock did well and duplicate those results elsewhere.
One of the major financial concepts underappreciated by the average investors is the concept of accessed risk versus anticipated returns. Unresearched and excessive financial risk are today’s answers to the dungeons of long ago. Investors should develop an investment style that fits their personality and risk tolerance, based on an understanding of each opportunity’s accessed risk versus anticipated return. Duplicating the long-term successes of specific investment selections is as simple as reviewing the fundamental factors that led to the initial selection. While there may be multiple positive dynamics assisting in a stock’s out performance, correctly identifying and reacting to similar future situations becomes more routine. For example, one of the more interesting times to buy commodity stocks is when the underlying commodity price is at 10-year lows, such as oil prices in 1997 and timber prices in 1999 - 2000. In my opinion, commodities that are setting new low prices for the decade are probable pretty cheap and are worthy of my time to investigate.
"Neither is there an end to the journey, Nor the torture" is also a true statement about investing. Personal financial issues are an important part of life, from cradle to grave. No matter at what stage, individual investment decisions interconnect and build with each other, forming the journey's current path and its future course.
Unlike the verses above, successful investors have learned to describe their financial journey, the journey’s direction, where the risks may lie, and have the ability visualize the path ahead.
Or does the poetic license I took with Jagdish Gupta’s exquisite wording accurately describe your financial lifestyle?
George C. Fisher is a 30-year veteran in DSP/DRIP investing. He is author of All About DRIPs and DSPs (McGraw Hill, 2001) and The StreetSmart Guide to Overlooked Stocks (McGraw Hill, 2002). Mr. Fisher is an avid dividend reinvestment advocate and utilizes the strategy with all dividend paying stocks, both at the broker and direct with the companies using their DRIP programs.