Archive for November 16th, 2008

Of the essence (The Financial Athlete #72)

November 16, 2008

Years ago I learned how to ski with a beginner’s 4-point ski lesson: 1) For the legs, keep your feet parallel (unless you want to snowplow) and always bend your knees; 3) For turning, shift weight on left foot to move left or right foot to move right; 3) For balance, keep chest aligned with hip or for advanced skiers squat to increase speed; 4) For rhythm and balance and to begin movement, use the poles.

Since then I have only skied a few times. Because of the 4-point lesson, which encapsulates the essence of the mechanics of skiing, I can still ski well enough to slalom down the hill.

This bring to mind the question: why do some investors experience consistent gains while others tend to lose? Those who experience consistent gains have firm grasp of the essence of successful investing, while those who tend to lose do not.

Here is the essence of successful investing:

1) invest for positive cash flow (passive income) from multiple revenue streams

2) invest at or below intrinsic value

3) reinvest a substantial percentage of after-tax dividends and distributions

4) analyze trends to gauge when to buy and sell.

“Think big, even if you’re small.” – Ao (pastamanvibration)