As an investor, the weak currency situation is often promoted as being good for investors of that country. These situations take a long time to evolve, and there are many factors to consider. However, in fact, a weak underlying currency is usually a large headwind for investors as the underlying value of an asset is being eroded.The logical question which follows is what would be a better alternative? Gold or other hard metals would seem to be the correct answer. Yet, the glittering performance of gold during the last ten years has suffered recently.
With investing capital in securities, many use a strategy of following well known investors choices. The thinking is if I own the same security which a good investor owns, I will do just as well as them. Maybe, maybe not.I believe investment success is based on using one's investment process and judgment to analyze potential opportunities. Good analysis is only one part of the equation for success with investing, as I see it. I believe another critical aspect is having the ability to hold onto your choices when others disagree, as evidenced by a decline in your position after you purchase it. Maybe you have experienced the same thing, but most of the time when I buy a stock, I expect it will go down initially. In fact, I believe you have to be willing to accept temporary losses initially in order to reap the benefits later. Many times, others will not believe in your choices. When you copy others ideas, it is much easier to just sell the position when it moves against you. If you actually go through the work of discovering, research, and analyzing an investment, you have a much better understanding of why you bought it. As a result, you are less willing to let it go when things go against you. You also begin to understand that no company is perfect, and almost all have issues which they need to address. On many occasions, investors buy a cheap stock using good analysis, but because the market price moves against them and their risk management rules, say, your stock is down 8% or so, you sell. You take the loss, and then, low and behold, six months later the stock goes up 30%. The analysis was right, but because you couldn't take the pain, you lose money. I believe thinking independently and not copying others gives you much better staying power, which ultimately helps your results.
Warren Buffett has just released his annual shareholder letter. As always, there were plenty of pearls of wisdom throughout the document. He criticizes fellow CEOs cautiousness in capital spending as a mistake, offering now is the time to invest heavily. He also explains his thinking on why having no dividend policy for Berkshire Hathaway is financially more attractive.He also made a case for stocks as a long-term investment. A simple message, but very self evident to those who are willing to take his advice. Listening to guy who created a company worth $200 billion when starting with only $100,000, of which only $100 was his own money, might not be a bad idea.
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