This post continued from previous post (Part 1)...
This is actually part 2 of of Jim Rogers' Street Smarts' book review in my blog. In my previous post, I focused on his advice on personal developments. In this article, I will focused on Rogers advice on investments. I will conclude with a final post later detailing Rogers' views on where/which is the best countries/areas to put your money in.
The sequence of the 3 posts are in fact relevant to a person's life developments in general. No matter how you wanted to excel in your education, career or relationship etc, first you must always developed and improved yourself. To be able to think properly and be a good person. Then you acquired the skills in a particular field. Finally you apply what you have learnt and excel in the particular field.
www.jimrogers.com
Anyway enough of my philosophy, below is the summary with excepts from the book.
Market can be Irrational - Do not be Arrogant
In 1970 Jim Rogers bought
puts. Market collapse and his money tripled. After that he sold short, but
market never collapses and he lost all money.
“I had been smart and had lost everything for being smart”
Mistakes
Early is Good if you can still Come Back
“Losing everything can be beneficial because it teaches you
how much you do not know. And if you can come back from a failure or two,
chances are you are going to be more successful in the long run.
E.g. Mike Bloomberg is sacked from Salomon Brothers before he
founded Bloomberg.
Do not worry about mistakes in life. It is good to lose money and go broke at least once, preferably twice. But does it early so that you are talking about US$20k not US$20mil, which you still can come back.”
Resist Diversification
“If you want to make a lot of
money, resist diversification. Brokers promote the motion that everybody should
diversity. But that is mainly to protect themselves. The way to get rich is to
find what is good, focus on it, and concentrate your resources there.”
Invest in What You know Best - Do Not Listen to Me - Do Not
Listen to Anybody.
“Stay with what you know best, but you must be very good at
it otherwise you lose everything including your shirt.”
“The way you become successfully investor is by investing
only in what you yourself have a wealth of knowledge about. If you do not know
what it is you know a lot about, just step back and take a look at your daily
life. Walk to doctor n take a magazine, TV what articles and what kind of
programs you watch…Soon you will figure out your real interest and what you
really knowledgeable about.”
Be
Patient – Do Not confuse Movement with Action
“Most successful investor do
nothing most of the time. Do not confuse movement with action. Know when to sit
and wait.”
“Example if you are knowledgeable smart and already made ten
times your money in ten years. You are successful. Now this is the most
dangerous time because this is when you think you are really smart, when you
think you really hot. Most dangerous! Now, you should do nothing.. Go to
beach….”
Do Your Homework
Rigorously
“If I were to tell you that you
could only make twenty-five investments in your lifetime, chances are you would
be extremely careful about investing. Invest very rarely.”
When is Bull market?
“Nothing is quite like a bull market to make people think
they are smart. All big bull, secular ended in bubbles.”
“Mother call saying she wanted to buy the stock. I asked why? She says well it tripled over the last year" I say "no mother, you don't buy it because it has tripled, you buy it before it triples!"
“Mother call saying she wanted to buy the stock. I asked why? She says well it tripled over the last year" I say "no mother, you don't buy it because it has tripled, you buy it before it triples!"
What Happen in a Bull Market – You Find a Foolish Kid
“In a bull market what you want is a kid who is too young to
know that what he is doing is foolish. You want a kid who will race into the bubble
and leverage it higher and higher. When things go bad, you certainly do not
want that kid around. The kid is probably not going to be around by then
anyway!
Guys like me will not make nearly so much money because we
had seen what is going on. The kid does not know why he is making money, which
is why he is making so much money.”
The rest of us are experience enough or smart enough to know
that this is going to end badly. But you need to be smart enough to know when
to pull out, to save yourself from the kid’s lack of knowledge and experience,
and that of course, can be hard to do.”
Get the Fundamentals Right
“You can invest in something all day long, but unless the
fundamentals are right, it is not going to take you anywhere. Get the
fundamentals right and the good news keep coming.”
I am agreeing to all the above points from the book. Specifically, I wanted to highlight on the point of making mistakes. There is a Chinese saying 失败是成功之母 which literally means failure is the mother of success. But failure can only be considered the stepping stone to success, only if you still can make a comeback. It is also important to experience it early.
Personal Experience - Big Loss at Sg Pools
I will like to share a personal experience. While I was in my last year of National Service in the late 90s, Singapore Pools had just legalized the betting of S-League football matches. With my income earned from part-time tuition and salary from army, I managed to accumulate savings of close to three thousands in more than two years.
Unfortunately, I started to indulge myself into Sg Pools football matches betting. Me and two of my camp mates were so engrossed that we will discussed about bets all day, read "football betting manuals", queue up at 7-Eleven to place our "winning bets". After awhile, we started to devise some "smart (really stupid)" betting methods ourselves. It goes like this, choose the most common score in a football match. We think it is 2-1 score. Then bet $10, if lose, bet 20$ next time, if lose again, bet $40 next time, so on and so forth.
It was really effective at first, and I remembered there was once, I am collecting more than $800 of winnings from the Sg pools counter. The auntie said to me "boy, not bad huh....better than winning 4D!" I was so proud of myself then. Two of my camp mates coming from rich family were having even bigger bettings wining initially in terms of thousands. We thought we were the cleverest people around. Now that I think of it, I realize we were the biggest fools then!
We thought our method were fool-proof until our appetite got bigger and bigger. "Not everyday Sunday!" Eventually the more I lost, the more I bet the next times and the more I lost. My last bet was >$2,000 on a single ticket. And Yes.... I blew it. All my savings throughout the entire National Service was wiped out! My two other friends lost each more than $5,000.
I was 20 then, preparing to go to University after ORD. Suppose to have thousands of my hard-earned money to spend. Yet, it was all gone in a few months time. I was devastated and vowed never to gamble again. Except for some small gamble in tens of dollars during Chinese New Year. And yes I still honour that vow today.
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