PsyopRanger said:
Although this as seen as heresy to the investors on this board, it also shows that it is possible.
It's not heresy. It's people trying to explain why your style doesn't work for them, and your defensive reaction might give you pause for introspection on your chosen investment style. Because if you're really confident in what you're doing then you wouldn't be so stung that you felt the need to strike back with words like "heresy".
Let's look at the percentages.
How many of the millions of American investors are willing to devote the discipline & effort to picking the right stocks at the right times, and continuing to be right? The motivation to succeed at this field doesn't come from money or Buffett & Lynch would've retired after their first millions. The motivation comes from being hard-wired to be absolutely fascinated & compelled by the experience. Same for the guys like O'Neill, Darvas, Livermore, Gary Smith, even Marcel Link.
If you're willing to devote a couple decades of the same discipline & effort then you'd better have the same internal gratification-- because the external gratification won't always be there for you, especially during recessions. And maybe you have to be good, too-- really good, as in top 0.01% good. If you're that good in your day job, wouldn't you be the top executive by now? Conversely, if you're that good as an investor then why are you still wasting your time working your day job?
In "Winning the Loser's Game", Charles Ellis points out that very few people win at tennis by hitting winning shots on the court. Most are just not dedicated enough to put in the time & effort to develop pinpoint 150-mph shots to the corners. Instead they "win" by not losing-- by keeping the volley going until their opponent makes the first mistake. Only a tiny percentage of even the professional tennis players win by hitting winning shots. Most of them excel at outlasting their opponents with great defense, minimal offense.
Look at casino owners. They know very well that blackjack can be played to put a small percentage on the player's side. But they're not playing blackjack for themselves or even hiring pros to do it for them-- they'd rather rake in the big money from all the fools who think they know blackjack or who are just playing for fun. It's much easier to make big money from blackjack logistics than it is from actively betting on the cards, especially when a six-sigma event can wipe you out just as easily as it could make you millions.
Investing is also a "loser's game". It's not a game played by losers-- that phrase means that it's a game where there are many many ways to lose and the losing penalties are far more severe than the winner's rewards. So to win the loser's game, Ellis recommends that you avoid losing. You can keep working on those winning shots, but you'll need to be very very good and you might need a lot of money to keep you afloat between wins.
When I ER'd I received a few thousand from my grandfather's estate and decided to start my "brilliant investor" career. Over the last four years my profits have exceeded the S&P benchmark (not too challenging) as well as the small-cap value stock benchmark (like the S&P600 Value sector). I've tremendously improved my financial analysis and fine-tuned my stock-picking methods (thanks, Brewer!) and, more importantly, I've shed all that investor-psychology baggage which holds us back from executing the courage of our convictions.
Know how that achievement makes me feel? Like I've been working. Pfffft. I'd rather spend the time with family & surfing.
In addition, while my profits will build a really nice longboard quiver, I suspect that replicating my achievements with our ER portfolio would bring in a tremendous element of performance pressure that would keep me awake nights. Read the first chapter of Gary Smith's "How I Trade For A Living" to see what it's done to his family life. I never really cared if I pissed away the small inheritance on tuition at the School of Investing Experience, but I'd sure be unhappy if I did the same with the ER portfolio and had to start chasing a paycheck again.
For further exploration of this topic you might find a more receptive audience at places like traderstalk.com, fundvision.com, M*'s "Hands On" board, and even at FundAlarm.com.
