The Michael Masterson Journal

Issue No. 20 - $1.91	Saturday, December 12, 2009
Have you ever been on a diet? Can you remember being tempted to eat a certain something? Resisting the impulse and then allowing yourself to take "just one bite"? What happened? If you're like me (and most people), that one bite simply stimulated your appetite and led to other bites... which led to a virtual food fest. You begin with discipline, make one compromise, and before you know it you are stuffing your face while telling yourself that tomorrow you'll start your diet anew. The same pattern holds true with investors. In a rational moment, they commit to a sensible strategy for buying and selling stocks. It works well so long as their stocks are gently rising. But the moment they get a taste of greed or fear, they abandon their strategy and buy or sell without any degree of reasonableness. This is why most individual investors lose money. It's not about bad luck or lack of intelligence. It's about greed and fear. Greed and fear are the investor's worst enemies. Greed will make you buy bad companies, simply because you are convinced their share prices will go up. Fear will prevent you from buying good companies because you are scared of the market or a market sector or something else. Greed and fear. Cardinal investing sins. And they aren't the only ones an investor must watch out for. Insecurity is another one. Insecurity -- a sin of the ego -- makes it difficult for an investor to admit that he was wrong about a stock he put his money into. Not admitting you were wrong means not selling a bad stock when it's going down. Many investors never sell their stocks, even when they are left with pennies on the dollar. A healthy attitude about investing is one that says, "Although I invested in a particular stock in good faith, I'll never know enough about the stock or the market to be 100 percent right all of the time. When the market causes the price of one of my stocks to come down, that is just its way of telling me that I didn't have all the facts." Laziness is yet another one. Laziness prevents investors from doing the right thing. And the right thing is to pay attention to your stock portfolio and make tough decisions when you should. Lazy investors like to buy and hold and console themselves with studies that show that such a strategy can work very well in the long run. But if you study the studies, you discover that it only works when the stock selection process is married to a disciplined approach to buying and selling. You can't hold every stock forever. Some companies go bad. When they do, you have to get out of them fast... even if it takes some emotional energy to do so. If these are the cardinal sins of stock investing, what are the cardinal virtues? To be successful as a stock investor, you must be virtuous in three ways: 1. You must be modest. You don't need to be the best and most successful investor in the world. Set modest objectives -- a 10 percent to 15 percent return on your investments -- and you will have a good chance of hitting them. 2. You must be humble. You don't know enough to predict the future. Admit it by setting stop-loss points and sticking to them. 3. You must be willing to work a bit. Umpteen studies have shown that the most important factor in stock market success is the consistent application of a rational system. Which system you follow is not as important as your consistency in adhering to it. But to learn and apply a rational system, you must be willing to do some work. You must find and follow a source you trust. And you must take action when opportunity avails itself. A 10 percent to 15 percent ROI may not get you wealthy overnight. But if you embrace these three virtues -- and don't abandon them when you hear an irresistible "story" -- chances are you will do much better than your friends and colleagues. Unless you are a rare exception, you're not even close to getting the vitamins and minerals you need from the food you eat. And evidence that these nutrients can have major health benefits continues to build. Consider these facts: A 1992 USDA study of 22,000 Americans concluded that only 4 percent of them were getting the minimum recommended daily allowance (RDA) of essential vitamins. Americans tend to eat the same foods every day -- and that's a big problem. Sixty-five percent of American daily diets are deficient in zinc, 70 percent do not include vitamin-C-rich fruits, and 80 percent do not include carotene-containing vegetables. Because of modern farming methods, most foods today have less nutritional value than they once did. For example, it now takes 60 servings of spinach to get the same amount of iron as one serving provided in 1948. And you would have to eat 25 cups of spinach per day to get the RDA for vitamin E. To get the most nutritional value, you should eat an organic whole foods diet rich in colorful plant foods. But no matter how great your diet, these statistics show that everyone should also take a multivitamin and multimineral supplement. For even more diet and nutrition tips, check out Total Health Breakthroughs. A reader writes in with a question I get frequently... "Can you recommend a business in which I can apply your principles and be successful? Of course, I will work hard at it to make it work. "I am disabled and have been unemployed for nearly three years now. And I am 15K in credit card debt. So time is short for me. I will be working as a team with my wife, who has been disabled for 25 of her 55 years." N.R. There is no one business that will give you guaranteed success, N.R. And I don't know enough about you to advise you what kind of business you might like or do well with. But given your financial situation, it's clear that you have to start earning an income quickly. And given the fact that you are disabled, there are lots of small businesses that may not be appropriate for you. Again, I don't know enough to say. My first thought was to suggest that you learn the skill of copywriting. American Writers & Artists Inc. has a program that can get you into money-making shape in six months if you work diligently, as you say you will. But my second thought has to do with another sort of job you can do at home. It's a business I didn't even know existed until just recently. And it has many advantages for a person like you. It requires no capital outlay. It requires no expensive tools. A computer with an Internet connection is all you need. It is easy to learn. There is a great demand for this service, but little competition. You can start out small and grow as big as you want. I'm talking about becoming a professional researcher -- doing online research for the information-publishing industry. You can charge by the page, by the hour, or by the job. It's up to you. The information industry is growing by leaps and bounds. Thousands of new copywriters and editors are coming on board every month, and many of them desperately need help in researching their subject matter. Whether it's business, finance, health, travel, sports -- you name it -- there are millions of pages of information being published every day on the Web. You can provide a very valuable service to all those writers out there who have more work than they can handle. Just offer to do the research for them and they will happily pay you a fair fee. I discovered this niche just last week while reading an essay by a well-known copywriter who churns out more copy in a month than most copywriters put out in a year. Her secret, I found out, is that she has a researcher who does all the background work for her. The researcher spends her time on Google, sorting through articles and journals and locating the facts and figures the copywriter needs. I can think of a dozen busy writers and copywriters who would love to have a researcher helping them. Maybe you could be that person! I've suggested to AWAI that they start a program to teach people how to be a researcher. If you're interested, get in touch with Katie Yeakle, AWAI's Executive Director: kyeakle@awaionline.com. Maybe you can be one of their first students. [Ed. Note: Michael Masterson welcomes your questions and comments. Send him a message at AskMichael@ETRFeedback.com.]
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