Editorial : CEO ·
First of all, investing means different things to different people. That is why it seems so confusing? What most people call investing is not really investing? People are all talking about different things yet they often think they are talking about the same thing.
No One Is an Expert at Everything
Investing means different things to different people. There is no one person who can possibly be an expert at the entire subject. There are many different investment products and many different investment procedures.
Everyone Has a Bias
A person who is good at stocks will say, “Stocks are your best investment.” A person who loves real estate will say, “Real estate is the basis of all wealth.” Someone who hates gold will say, “Gold is an obsolete commodity.”
Then you add procedure bias and you really become confused. Some people say ‘Diversify. Don’t put all your eggs in one basket,” and still others such as Warren Buffet, America’s greatest investor, says, “Don’t diversify. Put all your eggs in one basket and watch that basket closely.”
All of this personal bias from so-called experts adds to the confusion that shrouds the subject of investing.
Same Market, Different Directions
Adding to the confusion is that everyone has a different opinion on the direction of the market and the future of the world. If you watch the financial news stations, they will have one so-called expert who says, “The market is overheated. It will crash in the next six weeks,” Ten minutes later, another expert will come on and say, “The market is set to go up even further. There will be no crash.”
Late to the Party
A friend of mine recently asked, “Every time I hear of a hot stock, by the time I buy it, the stock is heading down. So I buy at the top because it’s the hot popular stock and then a day later it starts heading down. Why am I always late to the party?”
Another complaint I often hear is: “The stock drops in price so I sell it, and the next day it goes up. Why does that happen?”
I call this the “late to the party” phenomenon or the “you sold too early” phenomenon. The problem with investing in something because it’s popular or rated as the No.1 fund for the past two years is that real investors have already made their money in that investment. They were in it early and got out at the top. For me, nothing is more frustrating than to hear someone say, “I bought it at $2 a share and it’s now at 1635 a share.” Such stories or hot tips do me no good and only frustrate me. That is why today, when I hear such tales of instant wealth and fast money in the market, I just walk away and choose not to listen . . . because such stories are not really stories about investing.
This Is Why Investing Is Confusing
Investing is confusing because it is a very large subject. If you look around you, you’ll see that people have invested in many different things. Look at your appliances. Those are all products from companies that people invested in. You receive your electricity from a utility company that people invest in. Once you understand that, then look at your car, the gas, the tires, seat belts, windshield wipers, spark plugs, the roads, the stripes on the road, your soft drinks, the furniture in your house, the shopping center your favorite store is in, the office buildings, the bank, the hotels , the airplane overhead, the carpet in the airport, etc. All of these things are there because someone invested in the business or building that delivers you the things that make life civilized. That is what investing really is all about.
Investing is such a confusing subject for most people because what most people call investing is not really investing.