3 REASONS INVESTING IN WALL STREET CAN BE STUPID
There are rules to everything.Â There are rules to games, to having a good marriage and likewise, there are rules to investing.Â In light of these rules, the madness I see going on in America is alarming.Â Let me point out 3 things I see as foolish to the point of being stupid.
- Most Investing Is Buying High
What are the rules of investing?Â They are like laws, like the law of gravity. So when you’re climbing a ladder, there’s a fundamental rule that you have to remember — gravity. If you pretend that gravity is irrelevant while on a ladder, gravity will teach you a painful lesson, right?Â Similarly, there are some established fundamental rules for investing. One of those is to buy low and sell high.Â
BUY LOW AND THEN SELL HIGH
In fact, this is the most important rule for investing. Now, what does that mean for Americans right now in 2021 with the market at its height? We haven’t had a market correction in over 10 years, almost 12. What does it mean to invest with this rule in place? Whatever it means, itâ€™s not happening for most Americans. Let me explain.
Letâ€™s think about what happens if you’re working for a corporation. Every month you are sending some of your money automatically before you see it into your 401k via auto draft. What does that mean in terms of investing? It means that every month you are making a small investment â€“ and are you buying low? No, youâ€™re actually buying high, aren’t you? You’re saying, â€œHere’s another two grand. Here’s another six grand of my money for my 401k; buy some more in Wall Street.â€ You are going against the fundamental rule of investing.
The market is at its peak. Trees don’t grow to the sky. They stop at some point. There will always be a major correction â€“ what is also called a crash. So is it a good idea to buy high via auto-draft from your earnings? That’s the question. Is it a good idea to buy high every month? Sooner or later you’ll be within that situation where you’ll have to sell low. And that’s a loss. That is stupid.
- Most Investing Ignores The Impending Crash
Letâ€™s think soberly about where we are at in the economy with the new president — he has told us tax rates are going to go up.Â Also, think about Wall Street-Â as you look at the stock market, it’s been growing except for a little burp in February and March of 2020. With COVID, it dropped 30% and then came right back. Well, there’s a reason for that. Most Americans IGNORE the reason for the bounce back.Â How does an economy caught in the middle of a pandemic with massive business shutdowns, large companies going bankrupt within weeks, and deep hysteria â€˜bounce back?â€™Â Because our fundamentals are still solid?Â Thatâ€™s absurd. What caused the bounce back?Â The government pumped in $6 trillion into the economy â€“ it artificially propped up an economy in the ICU. That’s the only way to explain it. What happens when the government stops pumping the streets with inflated cash? A crash.
Put that aside, as you think about where we’re at, in Wall Street – in the history of markets crashing, things going up and down. They crash every 12 years or so. The 2000 crash. The 2008 crash. We are overdue are we not? As you think about the new administration, why should you be thinking about getting into Wall Street? Or should you be getting out? Ignoring history and cycles is stupid.
- Most Investors Keeps Their Heads In The Sand
Let me give you an example of what I find extraordinarily interesting and ironic and kind of stupid.Â I will bring to an investor a private investment with a guaranteed return. Let’s say, it’s the R.E.A.L. OPPORTUNITY. This is a bridge loan. It pays out 10% every three months and is fully collateralized. Pretty impressive right?Â Â
You would think this investor would jump at the chance to invest in this. Instead she will ask a million questions, she wants to look over everything, have her CPA look over it, scrutinize it up and down before she even thinks about participating. Finally when she decides to move ahead she asks, â€œWhat’s the minimum?â€ She puts in the minimum?? Wait, it gets more bizarre.
If I asked that investor, â€œTell me about all the money you auto draft into the stock market; tell me about your portfolioâ€ they would confess sheepishly that they donâ€™t have a clue in hell how to interpret their portfolio statement. They donâ€™t understand how it works. They wouldn’t even know that typically a 3.5% fee charge is being taken out of their money every year. Does that make sense?
That’s my question: does it make sense to literally not understand what your 401k is invested in when you want to hyper-scrutinize a non-Wall Street opportunity that is contractual and clear?
Every month, Americans are putting money in this portfolio that they donâ€™t understand; they don’t understand how it works. They don’t understand what the investments are. All they can tell you is, â€œwell it says my risk tolerance is this.â€ They willingly and monthly turn their money over to strangers to invest this for them in a peak market. This is stupid.
The market is at a peak. Despite the rule â€œBuy low, sell highâ€, Americans mindlessly and blindly buy high every month. That doesn’t make sense. They do this in an economy still suffering from a pandemic and overdue for a crash â€“ that doesnâ€™t make sense. They auto draft their wealth into a system they will tell you freely that they donâ€™t understand. That doesnâ€™t make sense â€“ itâ€™s all stupid To make matters worse, we are so brainwashed by the financial institutions and lulled into passivity with our head in the sand that when we are offered a non-Wall Street investment tool that gives much more control, promised contractual returns and full collateral protection we will scrutinize it out the door. This doesn’t make sense.
Look, the stock market is not going to continue to rise forever. No matter what the president, no matter how much stimulus, it’s going to crash. Is it good right now to stay in Wall Street? Most of the millionaire’s I’ve talked to – they’re getting out. They’re pulling out. They are putting their money into a cash position or putting it in something that is secure until a year or two and then they can get back in. What do you think about that? That does not sound stupid to me.
So my advice to you comes as a question: if you are in Wall Street, would it be a bad idea, would it hurt you, would it harm you, if you could take your money out of Wall Street and still keep it in a 401k structure, like an IRA for a season? Does it make sense to keep putting your money into something you have no control over – something that’s highly speculative, like stocks and bonds, mutual funds and so forth? What if for a year, or maybe two, you put it into something that is contractual, like real estate, like the R.E.A.L. OPPORTUNITY or some other contractual opportunity like a joint venture in a short term rental or in a multifamily apartment complex? Would that be a bad idea? Would it hurt you? Absolutely not! That would not be a stupid idea. That is something that I help my clients do and I think you should consider.
Click here to find out more about the R.E.A.L. OPPORTUNITY bridge loan that promises 10% every 3 months.