Sunday, 31 March 2013

Quote for the day

"Don't gamble, but watch for unusual circumstances. Excellent investment opportunities come about when superior businesses experience a one time event that depresses the stock price in relation to its intrinsic value." - Warren Buffett

Why Being an Investor is an Ideal Career Path

There are two big decisions that we all make in life; a family life, and a career path. Personally, I think choosing the right career path is just as, or more important, than deciding if you want to get married, start a family, and the what-not. So here’s why I think being an investor is an ideal career path.

Obviously, you get to work for yourself!
I hate working for others. I absolutely hate it, for two reasons.
1 – You’re not being paid what you’re worth. To make a profit, your employer can’t pay it’s employees what they’re really worth. Let’s put it this way. You’re company has 100 workers, and makes $10 million of profit each year. In order to make a profit, they must pay each employee less than $100,000 a year; less than what they’re truly worth. So if you work for yourself, and make $10 million, every single penny of that $10 million goes to you (except for the costs, of course).

2 – You’re fate is in the hands of others! If you work for others, they can decide at a moment’s notice to fire you. They can fire you during a recession, leaving you destitute. They can raise idiots up the corporate ladder, while hard working decent guys like you are stuck. I hate it when others have control over my future. This is my life, and no idiot is going to decide if I succeed or not. If I fail while working for myself as an investor, at least I can say that I tried my best, and failed with honour. But if I fail because my employer has a bone to pick with me, that’s just plain frustrating, because often times there’s nothing you can do about it.

Freedom to work from wherever you want.
The only tools I have as an investor are a couple of investment books, my laptop, InteractiveBrokers (a trading software on my laptop), Metastock, and the internet. I can choose to work from my house, the library, anywhere I want. I can move to China for 6 months and invest in the American markets from there (ahhhhh, the wonders of modern day technology). I can lounge on the beach, and work on my investments. So what happens if you work for someone else? Can you pack up at a moment’s notice? Probably not. So what happens if you run a brick and mortar business? Can you leave whenever you want? Absolutely not! Who’s going to be around to monitor your business? You’re tied to a physical location. But as an investor, you aren’t tied to any one place.]

Freedom to pack up and take a long vacation any time.
As long as I have the money, I can pack up and go on vacation for as long as I want. If I’m feeling to stressed out, I can shut down my investment positions, tell everyone I’m leaving, tour the world for a few months, then come right back to my investments. It’s a wonderful lifestyle, I tell you! If you’re an employee, your boss will probably fire your ass if you leave for more than a month or two. If you’re a small – medium sized business owner, you’re business will shut down if you leave it for more than 2 weeks! But as an investor, you can close up shop and come back whenever you want. Your investment skills will always be with you, and so will your capital.

Investing is an old man’s game.
In my opinion, working as a pure engineer in the tech industry is a terrible idea. Once you hit 40, you’re competing with guys who are in their 20s that can stay awake on 3 hours of sleep each night and work like they’re demented or something. There’s no way you can compete with them. So let’s face the truth. We’ll all be old one day. So why choose a career where you’re golden age is when you’re 20 or 30 something, and after that , go on a long decline? Choose a profession where experience counts, dammit! In the realm of the financial markets, there is nothing new. There will always be panics, fears, exuberance, bubbles, etc. Once you’ve had enough experience, you know first hand how the future for the markets will play out, because market history repeats itself.

You can go long and short, or choose not to have a position at all.
Most professions get wacked by the economic cycle one way or another. Mass layoffs in some industries during recessions, and mass layoffs in other industries in prosperous times. One cannot switch professions all the time; you can’t just jump ship to the hottest industry that’s hiring like crazy whenever you feel like it. As a business owner, you can’t profit from both good and poor economic times. A business is a slow, lumbering ship. You can’t turn 180 degrees at an instant’s notice. You can’t close down your business if you foresee bad economic clouds coming, and reopen when things are all better. But as an investor, you can change from 100% long to 100% short. Or, if you’re confused, you can close down all your positions, and choose to simply conserve cash. As an investor, you get the benefit of DOING NOTHING if you want. If a business does nothing (and doesn’t continue it’s cash flow), it will go bankrupt. If an employee does nothing, he or she will be fired, and likely be incapable of making ends meet at home. But as an investor, you have the benefit of waiting for the right opportunity.

All knowledge can be used.
If you’ve seen the Turtle Trader, you’ll notice that many successful investors didn’t start off as an investor. Many were formers soldiers, plumbers, chess players, soccer players, programmers, etc. Nothing goes unused in the realm of investments.

You develop a clearer view of the world.
A big part of investing, obviously, is knowing what’s going on in this world (which grows your ability to predict the future). You don’t want to be poor Joe down there who works 9-5, lives an oblivious life, and wonders what the hell’s going on when he gets fired and sees screaming EQUITIES ARE DOOMED headlines in the newspapers one day. I call guys like Joe a fool. They are like the masses – just following the herd to their slaughter. You have three choices in life. Be ahead of the trend, go with the trend, and fall behind the trend. Most successful investors go with the trend (although a few are talented enough to go ahead of the trend). These guys won't be killed too badly when some undesirable, unforeseeable future rears its ugly head. But most people (like Joe), are the obvious kind; behind the trend. These are the guys that get killed really, Really badly.

And last, but not least…..
This should be really obvious. If you're good at investing, you can make millions and billions. But then again, if you're not, then find another profession.