investors get trapped in the numbers. This can be a huge
error. Money is more than mathematics. When we are caught
in counting we fail to see the big picture. Yesterday's
message looked at my portfolio and changes recently made.
This portfolio has done very well….for me, but only
because I have stuck to principles that work…for
me. First I invest in what I know. Second, I invest in my
beliefs and third I accept what I did not know.
am not trying to sell you on this portfolio. The agenda
of this message
is "Have a portfolio that is you…and love it!"
Merri Have Investing Meetings at Hotel Quito in Ecuador
my portfolio thinking will better define your own unique
My decision making
process is based on many factors including #1: ownership,
#2: principle, #3: logic #4: intuition #5: trends #6: action
and #7: diversification.
looks at ownership.
consider my portfolio uniquely intimate to my knowledge,
standard of living,
lifestyle, wants, needs and desires. I do not separate
the results of my portfolio from my life. Most investors
don't factor their lifestyle into their portfolios
at all. They use artificial bellwethers instead.
For example if
the Dow Jones Industrial Average is used as the standard
and it has risen 25% over a period when their portfolio
gained 30% they feel good for outperforming the standard.
If their portfolio only rises 20%, they feel bad.
Yet they do not
look at how their profits relate to their lifestyle. I
care less about the Dow or any artificial standard. My
goal is to have more money than I had before after expenditures.
is a really important rule. Make expenditures part of
decisions. You have more control over you spending than
almost any other financial factor. If the stock market
is down, there is little you can do about it. If the economy
is lousy, you alone cannot improve it. If your currency
is crashing, you can't really change the momentum.
But what we all can do is to change the way we spend!
friend of mine is one of the largest portfolio managers
in Canada and
he once told me about an unhappy client. This lady had
inherited three million dollars. He said he was about to
earn 10% ($300,000) for her and she spent it all. This
year he felt he would be lucky to earn 4% for her ($120,000)
yet she wants to spend $300,000 again. His comment is "I
cannot convince her that she must reduce her spending if
she does not want to erode her capital."
Next message looks
at how to adjust for lifestyle.
Until then, good
Gary Scott Conducts
International Investing Courses at his North Carolina Farm
PS: Learn more
about my portfolio thinking in a fun way at GaryScott.com/65thoctave/index.html