3 Magic Questions

By Stephen Sutherland, author of Liquid Millionaire.
Posted in the Category of ISAS, SIPPS, Investing, Stock Market on 9th October, 2011.
Tags: bull market, institutional investors, isaco, liquid millionaire, market health, market indexes, nasdaq composite, russell indexes, s & p 600, stock market, stock market summary.

3 Magic Questions

Before you embark on any personal quest to beat the market you must be clear about the challenge you are taking on. The best way to do this is to ask yourself the following simple questions:

Can I devote a significant amount of time to investing?

Golfer Gary Player once remarked “the harder I practice, the luckier I get”. This quotation is tailor-made for investment. The more you read, research and learn, the better an investor you will become. Successful fund picking requires passion, considerable dedication and bags of effort. If you’re not inclined to put in the required time and elbow grease, unfortunately you’ll lose money.

Can I stomach one of my funds losing 80% or more of its value?

Even when an investment fund is managed by an investor with a proven long-term track record, the fund can still fall out of favour and unless you know the optimal time to buy and sell, your choice of fund can often turn into one you shouldn’t be invested in. Some top performing funds top out and often result in huge corrections, some as large as 80% or more.

Can I risk the possibility of long-term underperformance?

The stock market offers no guarantees. While successful fund picking requires considerable dedication and effort, it’s not necessarily the case that considerable dedication and effort always leads to successful fund picking. Despite your best efforts, there’s always the possibility of consistently underperforming the market. Can you accept the possibility that, say after five years, you won’t have beaten the market average?

Can you also accept that when you get to the time you had in mind to retire, you have to push it back, five or ten years simply because you haven’t enough cash? And what if you were forced to significantly downgrade your lifestyle? Could you handle that?

If you believe that 1) You can devote a significant amount of time to investing 2) You can stomach one of your funds losing 80% or more of its value 3) You are willing to risk the possibility of long-term underperformance, you probably don’t need our help and good luck with your investing.

If however you are like most of our clients who tell us they don’t have sufficient time and don’t like to take risks, Shadow Investing could be for you.

Until the next time my friend.

To find out more about Shadow Investing click here.

Would being able to have a conversation each and every day with me to ask what I’m invested in so that you could copy me? Imagine, when I quickly swoop in on opportunities to profit, you could too!

Today you can take a sample of my take on the market for free, without obligation and make up your own mind.

You can take a look at The Big Picture, October Edition or if you prefer you could look at ISACO’s 2011 ISA Guide.

If you like how I think you might like the idea of shadow investing me. Shadow Investing is new concept that allows you to get almost identical returns to the ones I get.

That means if I get a 12% annual return, so do you.

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