Gold Extremely Volatile: Stamina Check Underway

Source: Lior Gantz for Streetwise Reports   09/30/2017

Studying Warren Buffett’s investment principles, says Lior Gantz, founder of Wealth Research Group, will help investors navigate today’s volatile markets.

I’m 33 now, and I’ve been investing in stocks since I was 16 years old. In that time, I presume that about 12 out of every 20 people I’ve spoken to about investments have quit the equities world. Three of them still invest using small amounts due to fear and always underperform the index. Four of the 20 invest with all their might and generate good, consistent returns.

One out of 20 have the DNA of a winner—every year, their portfolio grows bigger, outperforming the known indexes, like the S&P 500.   

Courtesy: JeremySiegel.com

As you can vividly see from this incredible and historical chart, over the long-term, publicly-traded businesses run by gifted management teams have turned every $1 into $704,997 in two centuries, for an annualized gain of 6.6%.

Wealth Research Group’s refined version of them called Wealth Stocks, have returned 11.3%, which turns every $1 into $5,807,437,041 in the same period of time.

Politicians were as corrupt back then as they are today. Bankers were just as criminal-minded then as they are now. Insider information was frequently used by crooks just as much as it is now. War was as common then as it is today as a means of solving national conflicts. Fraud was as widespread back then as it is in 2017. Manipulation and rigging are as old as the Bible. Nothing has changed.

The bottom line is that you don’t have to fear the stock market itself, for it works in spite of these things. What you need to be cautious of is how you react to the stock market, because the “market” is basically buyers and sellers – all are humans or algorithms designed by humans just like you and I.

The stock market is how the financially ignorant transfer their wealth to the financially educated—this is a sentence I have hung in my office, for it reminds me that my No. 1 objective is to constantly improve and share my insights with you.

Those 14 out of every 20 individuals will never get to enjoy that 6.6% return, and it will cost those quitters hundreds of thousands (if not millions) of dollars in the span of a lifetime, not to mention the damage of teaching their children and loved ones that the stock market is nothing but a “casino.”

People only quit the stock market because of one reason: a catastrophic loss.

The pain of losing hard-earned cash is too disturbing. It’s sometimes a blow to one’s ego, and at other times, it’s an emotional drain to confide the loss with a family member. No matter what it is, a catastrophic loss makes most stop investing altogether.

Avoiding Horrible Red Screens

When I was 13, I was hired for the first time. The job was coaching basketball to 6-year-olds, and I was the assistant coach.

The head coach was the talk of the town so I asked him one day how he has this attractive demeanor about him, and he replied that for three years, he was the assistant coach of the national basketball champions and learned from their head coach what a winner’s DNA is.

He told me that if I wanted to be successful, the fastest way is to closely study the most obvious success story in the field I want to excel at and personalize the lessons I learned to my own character.

Three years later, at the age of 16, before making my first ever investment, I asked my banker who the richest investor in the world was. That banker was the first person to mention to me the name of Warren Buffett.

Books and documentaries about Warren are very interesting. His interviews also shed light on his character, but if you want to give anyone the most precious education at no cost, send them this link.

These are the annual letters Buffett writes to shareholders, which I doubt more than 1% take the time to read, but for hedge fund managers worldwide, it offers a glimpse into the mind of the man with the best long-term track record in investment history and is mandatory reading.

I’ve read each of them, and here’s how Warren Buffett, a man who earns billions of dollars every year, has avoided losing 50% of his money throughout his career: HE HASN’T BEEN ABLE TO.

Yes, the world’s richest investor has suffered catastrophic losses in his life, yet he reigns supreme.

Berkshire Hathaway’s stock dropped nearly 50% in 2008 and had numerous 20%–40% corrections throughout its lifespan. Even so, every $1 invested with Warren has turned into $119,574.

His four main principles that allowed him to succeed above and beyond any man and weather through the madness of equity markets are:

1.       Margin of Safety:

Warren and Charlie Munger, Berkshire’s vice chair, buy cheap. They NEVER overpay for a stock. The highest price they’re willing to pay is fair value only in the case of a world-class business.

For example, Warren had a file on Heinz, the ketchup empire, going back to 1980, but only made his move to acquire it a few years ago.

This discipline has saved him from chasing others into bubbles, and knowing this will save you from doing the same.

The Buffett indicator is signaling that stocks, in general, are insanely expensive:

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