Investment Strategies

The Dynamic Wealth Report
May 2, 2007

The Biggest Mistake in Investing

I’ve been in the Investment Industry, and on “Wall Street” for many years and over time I came to realize one important fact.

This fact is nothing novel, nothing original, it’s not even hard to observe.

Strangely enough, however, most average investors miss this fact.  They miss a key bit of investing strategy that can improve their trades.  What is this fact you ask?  It’s simple.

In the long run: great investors can make money if their strategy is to go long the market.  Great investors can make money if their strategy is to go short the market.  However, investors without a strategy will lose money every time.

Honestly, this simple idea is one of the most important keys to investing. It’s often the reason why new, and even experienced investors lose money.  You can have the best investment strategy in the world, but if you don’t follow it you will lose money. Every investor at some point in their career, is affected by this problem. This problem is so prevalent that major mutual fund managers and institutional investors have a name for it, strategy drift.

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The biggest mistake in investing, that I see every investor make at some point in their career, is buying a stock without a strategy.  I don’t care if you are long or short the market, if you don’t know why you bought a stock, option, or commodity and how you are going to exit, you are setting yourself up for a world of trouble.

Every time I hear someone talk about buying a stock I always ask what their investment strategy is.  Try it yourself, 9 times out of 10 I get a blank stare.

You must know what your strategy is on every trade, and as you develop your investment skill set you will find that you naturally gravitate towards a particular strategy.  It’s important to find a strategy that you understand, and most importantly, stick with.

Remember, it’s the little things that matter!

•  Gold (recently flat)

Bucking its recent 2 month rally, gold flattened on stability in the dollar.  Gold traditionally moves inversely to the dollar, and is used often as a hedge against rising prices.  With the recent weakness in the dollar, gold has been driven upwards closely testing the $700 level.  However, over the last week the dollar has firmed and the price of gold has stabilized. Watch the dollar / gold correlation closely as it will no doubt impact the markets.

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