EXPERIENCED vs INEXPERIENCED
approach to cycles
INEXPERIENCED Investors find it hard to think of markets as
following natural cycles, like the seasons
EXPERIENCED investors know they do
INEXPERIENCED investors like to buy and hold.
Falling asleep until markets make higher highs and then deciding
it's the right time to "back up the truck" and buy, buy, buy
near market tops.
And, after markets decline and hit lower lows,
can't stand it anymore and often sell out near the bottom.
EXPERIENCED investors like to buy lower and sell higher,
knowing that every four to six years or so, markets stop going up and make a top,
then go down to eventually make a trough or bottom, usually
declining 30 to 60 percent or more a few years later.
Studying these natural financial patterns and cycles, and using them to clients' advantage, is my investment philosophy.
Based on time-proven investment principles,
and might be called
PLANTING, GROWING, AND HARVESTING MONEY.
And it works...if you have the patience, stamina, and experience to
stick with it through a full market cycle.
THE FOUR EMOTIONAL/PSYCHOLOGICAL PHASES
of a FULL MARKET CYCLE.
Each phase elicits strong emotions from greed to fear.
INEXPERIENCED investors succumb to their emotions, while
EXPERIENCED investors have mastery over their emotions and are able to
act opposite to their feelings.
INEXPERIENCED investors, at market bottoms, feel DESPONDENT, they are DEPRESSED and want to (and usually do) sell everything. This is the CAPITULATION PHASE.
EXPERIENCED investors welcome this opportunity to put cash to work. They use a disciplined plan to average in at lower prices, knowing that markets often correct 40, 50 and 60 percent or more. The lower the markets go, the more money they put to work until all investable funds are employed.
INEXPERIENCED investors, as markets recover and begin to rise,
are too traumatized from the last correction and remain in cash.
After some time, perhaps several years and after markets have moved significantly higher, begin to feel RELIEF, then HOPE, then OPTIMISM, and finally EXCITEMENT.
They begin to think about moving out of cash and back into investments again.
EXPERIENCED investors continue to put cash to work,
buying on dips.
INEXPERIENCED investors, as markets level out and begin the topping process, begin to feel a sense of THRILL AND EUPHORIA and finally muster up the courage to put their money to work and buy, buy, buy.
EXPERIENCED investors begin a disciplined plan to sell and lock in profits,
to the Inexperienced investors who are too happy to buy.
INEXPERIENCED investors, as markets begin to decline, begin to feel ANXIETY, then DENIAL, then FEAR, then DESPERATION, and finally PANIC as the markets move lower and eventually bottom out.
EXPERIENCED investors, having sold out near the highs, and
waiting PATIENTLY AND COMFORTABLY IN CASH (OR BONDS), begin their disciplined buy program, once again.
Investing decisions are often based on emotion.
They are psychological.
How people handle their emotions,
whether one handles them well or poorly,
for success or failure,
seems to be a function of experience.
Are you EXPERIENCED OR INEXPERIENCED
in making your investment decisions?
H.I.M. STRIVES TO:
Appeal to and attract experienced investors.
Look for attractive opportunities in the lower troughs of the financial cycle, and accumulate assets at lower prices
Then waits until the anticipated upswing and sells at the top of the cycle, when assets are most attractive to the majority of investors.
By employing this process with discipline and intelligence,
believes it is possible to beat the market at a higher rate of return than
a typical buy-and-hold strategy.