I've been in this position many times. I remember when I first heard of Amazon in 1994. I remember when Google went public. I knew google was a great company, because I was in the search industry, but I didn't invest. I didn't feel it was in my circle of confidence. I remember when Apple was at $13 and had $6 of cash in the bank, and I still passed.
I don't regret any of that. Ok, well, I do, it stings a little. I'm greedy, I can't deny it.
But when I have invested, after a few years stumbling I ended up making more than a %100 return a year for many years of the last decade. I saw the housing boom before it happened (when Motley fool was recommending real estate) and profited from the boom and the bust (Which really started in 2006, though wasn't in the popular consciousness until 2008.)
And then I got out in 2007, after my best year ever. Why? The market was not acting the way I believed was rational (or the rational irrationality typical of the market that creates inefficiencies allowing me to profit).
It was a tough decision, getting out in 2007. But I felt great when just the next year it became clear my timing was perfect. (This is not a super power on my part, it was just good timing. I could have made more by waiting 6 months, but by comparison, I did fantastic.)
These hard decisions may look foolish in retrospect or like genius. I don't fault fool.com for being cautious about google.
The point of investing is that you have to do it based on rationality and the calculated return given the amount of risk.
A high price and a low confidence factor in the underlying business can mean a bad investment. Consequently a 100 year old company that is "boring" and thus unpopular can produce a massive return, because the price and the risk is low.
Jumping in to ride up over valued companies (like google was at least for many of those years) is what led to the original dotcom. I lost money on a couple of my positions there because I fell into that trap... and learned my lesson.
So. Don't look at this as stupidity. It is wise to pass. You do better by not taking flyers on things that don't seem like mathematical sure things (risk factored in) within your circle of confidence. I'm no investing genius, but I am disciplined... and that's all it takes.
On fool.com:
The motley fool was a great and useful website for investing in the 1990s. When the dotcom boom was happening they advised caution (though they made their rep in the early days by recommending companies like iomega). Then around 2000-2001 they seemed to have a change in management, or at least a change in focus.
They switched from being prudent contrarian investment advice, to more mainstream and more "opinion" oriented.
It is kind of impressive to think that I stopped going there a decade ago. I literally haven't visit that site for 10 years, and I used to spend a lot of time there, to the point where I had quite a following.
For me the turning point of The Motley Fool was when they started to send out those loooong 12 page email marketing pitches that reminded me too much of a penny stock pitch. ALL CAPS PROFITS!!!! 127% Growth! They still send them out.
It took me too long to realize the site I had loved was gone.
It is not quite the same as the old Motley Fool as it focuses on Global Macro only, but there is Macro Man. Now written by Team Macro Man, a group of macro people that work in London (perhaps elsewhere for a variety of investment banks, former investment banks and/or hedge funds. I highly recommend it; not quite the same but of the same gist.
Not that I'm aware of, but I have long since graduated from seeking such advice.
I think the best source of investment insight comes from studying Warren Buffett's methodology. Mary Buffett wrote a book called "Buffetology" which is really accessible and quite good. An author by the name of Timothy Vick has written several books on buffett. (How to pick stocks like warren buffet is a good one.) For awhile there I bought all the ones I could find, and it was probably the best $100 I spent.
Eventually I created a spreadsheet that I'd use to do my net-present value analysis. I'd take the stock's price, the historical growth, my estimated growth, and work back to figure out what my projected return would be in 5 years.
You know you've mastered investing when you're able to predict these returns pretty accurately, though it takes time to know if you were right or not. It is ok, there is no hurry, you can just put money aside and save it (though I'd hedge against inflation- I'd store it in gold or silver these days.)
Once understanding investment, economics came to play a huge role in my understanding of how things worked and where things are going.
The mises institute: http://mises.org is the best source of daily informative articles on economics. They were talking about the housing bust around 2000-2001. Mises himself predicted the great depression, the invasion of Austria (where he was from, and where his fellow economists laughed when he said that by the same time the next year the Nazis would have control) etc. I don't read it all the time, and just read articles that I find useful.
The Mises institute has a lot of books for free from Mises and Rothbard that you can download, and from many other economists.
But probably the best book on economics to read is "Economics in one lesson" by Henry Hazlitt. You can get it in PDF form here, I believe: http://www.hacer.org/pdf/Hazlitt00.pdf
Studying Buffet is investing 101, studying economics is investing 201.
I also read a lot of books like "The gorilla game" and "the wealthy barber" and stuff like that. They were less useful than the Buffett books, but they all had nuggets of good advice.
Eventually, I graduated to Options as a strategic investment. A $100 book that became my bible.
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Please note also, I'm out of the markets right now. I think the outlook for the US is not good, capital controls are coming and that there's going to be a major, and very painful, rebalancing of the global economic structure.
Next time I buy stocks I expect they will be on an asian exchange.
Good advice on the stocks, but for those not in the know, mises.org presents a sort of ultra-libertarian point of view, and pretty much only that. In other words, they're not likely to ever present ideas differing much from their own.
While they may or may not have some good ideas, it's not really mainstream economics, and there are some discussions covering that on the net that are worth reading prior to reading their material.
And one of Ludwig's chief chips was that we should all go back to the gold standard, so take with a grain of salt the argument that you should put your money in gold and silver to hedge against inflation (they are both in long-run bull markets).
I don't regret any of that. Ok, well, I do, it stings a little. I'm greedy, I can't deny it.
But when I have invested, after a few years stumbling I ended up making more than a %100 return a year for many years of the last decade. I saw the housing boom before it happened (when Motley fool was recommending real estate) and profited from the boom and the bust (Which really started in 2006, though wasn't in the popular consciousness until 2008.)
And then I got out in 2007, after my best year ever. Why? The market was not acting the way I believed was rational (or the rational irrationality typical of the market that creates inefficiencies allowing me to profit).
It was a tough decision, getting out in 2007. But I felt great when just the next year it became clear my timing was perfect. (This is not a super power on my part, it was just good timing. I could have made more by waiting 6 months, but by comparison, I did fantastic.)
These hard decisions may look foolish in retrospect or like genius. I don't fault fool.com for being cautious about google.
The point of investing is that you have to do it based on rationality and the calculated return given the amount of risk.
A high price and a low confidence factor in the underlying business can mean a bad investment. Consequently a 100 year old company that is "boring" and thus unpopular can produce a massive return, because the price and the risk is low.
Jumping in to ride up over valued companies (like google was at least for many of those years) is what led to the original dotcom. I lost money on a couple of my positions there because I fell into that trap... and learned my lesson.
So. Don't look at this as stupidity. It is wise to pass. You do better by not taking flyers on things that don't seem like mathematical sure things (risk factored in) within your circle of confidence. I'm no investing genius, but I am disciplined... and that's all it takes.
On fool.com: The motley fool was a great and useful website for investing in the 1990s. When the dotcom boom was happening they advised caution (though they made their rep in the early days by recommending companies like iomega). Then around 2000-2001 they seemed to have a change in management, or at least a change in focus.
They switched from being prudent contrarian investment advice, to more mainstream and more "opinion" oriented.
It is kind of impressive to think that I stopped going there a decade ago. I literally haven't visit that site for 10 years, and I used to spend a lot of time there, to the point where I had quite a following.