THERE are two subjects that the average person has little understanding about—health and wealth. Did you know that the most deadly cancer with a five-year survival rate of only 7.2 percent and the second-highest frequency of 1 in 65 persons is pancreatic cancer? Better yet, do you even know what your pancreas does? Me neither.
As a result of our ignorance, we rely on people who do understand the human body and health. As a historical reference, I thought at one time of becoming a physician. Then I realized that I do not like being around sick people. But, I also realized that I do like being around rich people and money. And with people being ignorant about money, I became a “wealth doctor.”
Not only are people mostly uninformed about what it takes be super healthy, we humans are also lazy about our bodies. After years of experimentation, I have proven that it is absolutely easier to cook a pork roast in the turbo oven than it is to steam a bunch of fresh carrots.
When it comes to wealth, the wisdom is to get educated, get a job, get a raise, get retired and die. There are about 2,880,000 Google results for “how to ask for a raise.” There are also about 152,000,000 results from “how to get rich.” You would think that there would be more rich people than there are based on the amount of information available.
The problem is that getting rich—like getting healthy—requires work and discipline. One of the “rules to get rich” is, “don’t spend money on stupid stuff.” Most people would respond with a “lazy” answer like “I work so hard, so I am entitled to spend some money on stupid stuff.” Why do you think my pork-roast budget is way larger than my carrot spending?
Of course this getting rich thing usually includes, “put money in the stock market”. Here again, if that was the simple answer, even in the Philippines we would be creating tons of new multimillionaires every year. The reasons we are not are the same reasons we are not creating tons of super healthy people.
Not everyone should invest in the stock market, and while some take that as the moral equivalent of saying that males and females are biologically different, both statements are true. The women’s world record of 10.49 seconds in the 100-meter dash was set by Florence Griffith-Joyner in 1988. The USA record, set in 2014, for the high-school boy’s 100-meter dash is 10.16 seconds.
For the 20 years ending 2015, the S&P 500 Index averaged 9.85 percent a year. The average equity investor earned a return of only 5.19 percent. That includes how every
retail investor traded, whether active speculators, “buy and hold” experts and those that inherited shares from long-dead ancestors who bought at the low in 1932.
But if you absolutely must invest in the stock market, here is the one rule you must know and follow. And it is on the same level as “don’t smoke three packs of cigarettes a day and expect to stay healthy.”
The rule is that, as a stock market investor, you cannot “buy low” if you do not “sell high.” In fact, most investors do fairly well at “buying” but are absolutely terrible at “selling.” They do not know when to take profits, and they do not know when to cut losses. The primary reason is psychological. They forget that the purpose of the game is to make money, not to be right. Further, experienced, profitable investors never buy into the nonsense that losing money is alright as long as you learn something. Making money is the best learning experience.
E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.