One of the most profound words I’ve discovered through the journey of life is “knowledge.” Defined as what is learned, understood or aware of. With it comes a limitless array of possibility. Without it, imposed limitations. If exposed, getting taken advantage of emerges in abundance.
This is particularly true in financial markets.
As they have aged, the perception of complexity has “cellared” like a fine wine. Processed financial products plentiful, with no shortage of commissioned professionals ready to showcase their small fee. Lured into this broken system, many limit the potential of their financial well-being.
The solution? Some have chosen the “do it yourself” route. A worthy cause. But without the intellect and discipline required, the path has often led to a “lost,” or at best “tethered” shirt.
Let’s revisit an excerpt of defined knowledge. “Understood OR aware of.” A common trait the crowd neglects to be aware of, is the limits of their knowledge and the extent of their ignorance. This can present a challenge in financial markets. At least, being successful in them.
Through nearly two decades of equity investing experience, a discovery I’ve made is this: Not preparing to fail limits the potential and degree of your success. But not in the way you’re thinking. With this type, failing never looked so good. In fact, leveraging failure, I was personally able to build substantial wealth that will live for generations.
So, what are the secrets of mastering equity markets? To name a few: emotional control, patience, and “noise” cancelling headphones. Add in a road map and strategic planning, and you may discover what Wall Street’s finest don’t want you to. You can do it without them.
It is rare to find an industry titan that will allude to this, but it still holds true. You can take command of your own personal finances.
But you need to learn how to be wrong. “But I thought I had to be right to be successful?” Let me throw you some knowledge. It’s often not IF you are wrong or right, but WHEN. You can be right today, but wrong tomorrow. The actions you take before, in between, and after are ultimately what defines your level of success.
Following a decade of being unsuccessful in markets, I learned quite a bit about how to manage a portfolio. I learned how to define personal risk tolerance. I learned how to create a blueprint for asset allocations. I learned how to spice things up with diversification. I learned how to build positions through the good times and the bad. I learned how to intelligently manage risk. I learned to be patient. I learned to be wrong.
Does the name Tesla ring a bell? At the close of the markets in May of 2019, it rang many for me. Mostly alarm bells. The position I started building into the futuristic electric car maker was down over half. And the bleeding didn’t end there. But in this case, it was part of the plan. The company was bewildered with skepticism by the financed, high-performance fleet of wall street’s best critics. Competition and extraordinary valuations made it hard to justify the $35 price tag (adjusted for the five-for-one split). Was it a riskier bet? Indeed. But the most ordinary mistake I’ve seen investors make is trying to avoid risk altogether, instead of learning how to intelligently service it.
In fact, the best investors are the best at managing risk. They sacrifice the lowest amount of risk for the highest possible rewards. How do they do it? There are many tricks of the trade. But it starts with constructing a blueprint. Defining the type of assets, you’re comfortable holding and their respective proportions, and you’ll forge ahead most. Next, it’s time to fill the buckets. The rookie here is quick to reinvent the wheel. Firing off a flurry of “hot stock tips” at the holiday party, of which they’ve obtained in exchange for newsletters, subscription fees, and crushed potato chips, few have ever heard of them. But the story doesn’t end there.
Most financial “experts” will raise the topic of “stop losses” at some point during the lure. They’ll also tell you “Cash is trash,” in effort to enhance their assets under management. But we’ll save that story for another day. A stop loss is essentially a trap to prevent further losses of capital, when a security you own is going the “wrong way.”
They prevent you from losing all the money you commit to that single position. Sounds great? It depends. When you manage an elite portfolio, downward momentum should be part of the plan. In fact, without turmoil, there would be reduced potential to realize massive rewards. Stop losses offer temporary self-preservation, but it often comes at the expense of upside potential. There’s a better way.
I believed in the Tesla business model, leadership, and potential for capitalizing on market share in an industry that was delaying innovation. And it helped that there was a pinch of FOMO. I had trained in parallel with the 1980 USA Olympic men’s hockey team for a moment like this, building up my legs to be ready for a battle. As Herb Brooks put it, “the legs feed the wolves.” Leveraging personally acquired risk mitigation strategies (fully disclosed in “Quiet Mike Speaks: The New Age Guide to Generational Wealth”), a substantial position was acquired during wall street’s moving sale.
Like the USA underdogs, defeating the four-time gold medalist soviets 4-3, I was soon to be sitting on gains of over 3,000%. Have you read those articles? If you invested $1,000 in “XYZ” in 1990, it would be worth…. a fortune! Fortunately, in this case I invested much more than the articles suggest. And it was orchestrated in a way that wouldn’t cause measurable wake if I was fully wrong. A good problem to have. That win afforded plenty of opportunities to be wrong elsewhere.
Many might say, “they got lucky.” Or “the reckoning will eventually arrive.” But when preparations, talent, and a common mission are in congruence, a failed mission is an intermission.
So, is winning the end game? We are talking about being right today. Looking ahead, we need to continue forth on our journey. We need to secure a degree of right and learn how to be wrong again tomorrow. The good news is, there are other beneficial ways to be wrong that would be frowned upon by Uncle Sam.
We have been blessed with powerful tools that make building generational wealth a choice anyone can make. One of them is being wrong. I’d advise those looking to secure their fair share to learn how to use it.
But there’s more to the story…
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