There’s a philosophy that just about everyone knows in the investing world: Buy low, sell high.
This strategy has succeeded brilliantly for decades, if not centuries. But it sounds so simplistic that it feels almost moronic…
Yet few investors manage to achieve this objective consistently. Why is that?
The answer relates to two key traits every investor needs: discipline and patience.
Far too often, we buy too high… and then sell too low.
We know what reason says we should do, but we follow our emotions. We lack the discipline and patience necessary to forego ordinary investment opportunities, while waiting for extraordinary ones.
It’s like when you see a great TV at Best Buy – 4K, 75 inches, comes with a smart remote, fits in that dead space in the basement that your wife hates – for $850. You want to buy it… NOW. You don’t want to wait for a better price, even though you know Black Friday is just one week away.
So you splurge on it… only to see it selling one week later for just $675… And you could have gotten a free wall mount as well!
Obviously, we can never know exactly when cheap is cheap enough. But patience and discipline help us say “no” to marginal opportunities, while waiting for better ones.
To outperform the market, an investor must maintain the discipline of saying “no” to bad risks. And then keep on doing that until good risks come along.
Today, I have a new “good risk” to share with you…
Get Ready for the First Quadrillion-Dollar Technology
Silicon Valley’s hottest venture capitalists are all in on a new, game-changing technology. Our own top VC, Luke Lango, is too. In fact, he believes it could become the world’s first quadrillion-dollar tech. And he’s ready to show you the best way to play it; a tiny stock with the potential to 79X in the coming months.
Just Say “No”
Marginal opportunities are what I call “bad risks,” or “asymmetrical risks.” That’s when the potential upside is much smaller than the potential downside.
Here’s an extreme example to illustrate the concept…
Riding in a barrel over Niagara Falls for a $20 prize. If everything works out perfectly, you win $20. If not, you perish.
Here’s another example…
Running red lights to get to Disneyland 10 minutes early. If everything works out just right, you make it to the “Happiest Place on Earth” and have to wait 45 minutes instead of an hour for Space Mountain. Or you might get into a horrible accident.
These examples of asymmetrical risk are so obvious that they seem ridiculous.
But many asymmetrical risks are less obvious, like the TV example I gave earlier.
Disciplined investors understand the dangers of these risks; that’s why they begin their analysis by asking “What can go wrong?” rather than “What can go right?”
Disciplined investors understand that investing is optional and that they must be selective.
It’s OK to say “no” to bad risks. Unfortunately, many investors grow impatient. We justify buying richly valued stocks by comparing them to stocks that are even more richly valued. But it is still dangerous to buy stocks that are “less risky.”
It’s no different than camping 40 feet away from a pride of lions because a few other folks are camping only 20 feet away. You might wake up every morning 40 feet away from the lions, just like the morning before. But getting eaten is also possible, if not probable.
Avoiding bad risks is the essential first step toward outperforming the market.
Say “Yes” When a Truly Remarkable Opportunity Arises
You cannot outperform the market by simply “buying the market.”
You must take only the best risks and say “no” to all the others. Sometimes you have to wait a long time for truly superior investment opportunities to come along.
But that’s okay – they’re worth the wait.
And as we speak, the wait is over for a new era of American wealth-building.
Deep in our country’s Heartland – a far cry away from the traditional moneymaking cities of Silicon Valley, Houston, or Manhattan – a massive new megatrend is unfolding.
I’ve alluded to it several times over the past few weeks, but now is the time to act.
Because as multiple forces behind this megatrend begin to converge in our backyard, stocks from every sort of background stand to stake a significant claim…
And reward their investors in the process.
