I started in the Investment Business at the top (of the market). In December of 1998, I graduated from the University of Louisiana, Monroe with a BA in Finance. After 4 1/2 years of representing the university on the swim team and doing what I could to study and stay on top of all the classes, it was time to move back home to Texas. Fresh out of college, by February of 1999, I was working at Morgan Stanley Dean Witter. By the time I was licensed, it was the middle of 1999, only about a year away from the end of one of the greatest bull markets in history. The close witness of the end of the spectacular bull market followed by the relentless decline certainly shaped my view of the publicly traded markets.
An experienced adviser said, “After two years you will have seen it all.” He was for the most part right. Over the next couple of years I consistently saw (and continue to see) the same mistakes repeatedly: fear and greed…capitulation and euphoria. There is no doubt that emotions play a large role in the constant fluctuation of the markets. To make matters worse, many investors tie these emotional investment decisions to their ego, or self-worth. This is a recipe for disaster.
Because of pride and how the market trains it’s participants, I saw people throw away 90% of their wealth by not selling a losing position. During the tech bubble, people got used to the market going in only one direction: up. They kicked themselves for selling because after they sold, they witnessed those same stocks move on to new highs. Investor discipline was lost…all anybody had to do to win was buy. By the time the great bull was ending, the market had trained investors to hold on to losing investments because ‘they would come back.’ That is what a long-term secular market does…convince investors of absolute truths which are not the case…like the market always goes up.
So after the witnessing the financial devastation, I felt there was a better way than buying ‘good companies’ and holding forever. Furthermore, I felt it was my calling to help people succeed in the stock market. I studied feverishly. I read everything I could get my hands on…books about fundamental analysis, technical analysis, investor behavior, self-development, option strategies, and stock market history, all with the goal of making better investment decisions. The financial collapse of 2008 only confirmed my beliefs. Of course, continuous learning and practice is important, but there is more to investing than intellect about the markets.
Investing is an art. To be great at anything in life, you must have a desire to always learn more, the willingness to constantly persevere, and most importantly, a commitment regardless of costs. Investing is no different. Since starting in the investment world, I’ve had the opportunity to learn many lessons and principles. Below are three things I think about and remind myself about every day. The most important being “Live to Fight another Day.”
1) The key ingredient to effective investing is preservation of capital. Capital preservation is the most important principle. It is the principle. It is undisputed. It has stood the test of time. We cannot control how much the market goes up, but we can control risk to a certain degree by getting out of the sour investments. The main point is that as soon as you discover danger, protect yourself by taking action, and get ready for the next opportunity.
2) Nobody has a lock on the market and knows which way the market will go tomorrow: whether up, down, or sideways. If you are going to be a successful investor, you have to be willing to take calculated risks without losing sleep. Risk can be scary and cause fear, so it is important to shed the suffocating weight of fear and be able to act without hesitation on both the buy and sell side of the equation. Not every investment is going to be a winner, but that is OK. Take the risk. If you are right, you will be happy. If you are wrong, you will be wise.
3) Diversify, but not for the sake of it. When most people hear this in regards to investing, they tend to think of this as investing in different asset classes, or asset allocation. Although this can be important, it can be just as important to diversify investment strategies and tactics. Fundamentally different investment strategies will generate different results depending upon the market. It is important to know your strategies inside and out, and which types of markets these strategies yield your desired results.
I am here to serve. I do my absolute best. This site is intended to be a resource and source of financial commentary for clients. However, no investment specific investment advice is given and none should be implied. If you think I can help, please don’t hesitate to email or call me.
Wishing you the best in all of your financial endeavors,
Adam D. Straseske, CMT