I had never read Lord of the Flies, but recently I’ve been intrigued by the old classics, so I picked it up. Early in the book, as the boys collect their bearings, they agree to make a signal fire to call for help. Thrilled by the prospect of no adults, and consequences as a result, they let themselves go. They felt they had the freedom to act however they liked.
Piggy, one of the main characters and the smartest one, asks them to calm down and act rationally. Piggy knows a fire could be dangerous and acting this way, “like kids” as he puts it, was not going to improve their odds of being rescued. The group needed what they all didn’t want — an adult.
Today, I notice investors are struggling to figure out what to do. Stocks are trending down and the historically reliable treasuries hasn’t served as a protector but have declined as well. Most investors, not knowing where else to invest, feel stuck. To relieve themselves of this feeling, many of them go searching for opportunities on their own often in the most high risk areas such as growth stocks or even crypto. True to their buy-and-hold stocks-always-go-up mentality, they go bottom-feeding on the most battered names — another very risky strategy.
Going hunting without a well-thought out and researched plan only leads to trouble. I’m afraid many investors, even those who invest with me, are breaking all of the rules of proper speculation. That is: going with the trend, riding winners, cutting losers and managing risk. All of the things I shout day after day after day. It’s simple, repetitive and mundane but it keeps you alive and allows to capitalize on your hunt.
I encourage you to think about your own investing. How you’re thinking. What you’re doing. How you “know” the things you know. How much risk you have currently exposed in the markets. What you’ll do if your favorite stock you spent hours researching doesn’t go up, but stagnates or worse — declines. Will you continue to hold on? Why? How long do you give it before you call it quits? In general, how do you plan to protect your money? A big loss usually takes a long time to recoup. And it typically doesn’t happen at all without a sound plan.
Eventually, we all have to grow up. We have to stop acting like kids. The money we earned matters. We must protect it. We must grow it. In less chaotic times, having money and a sound investing strategy are important. Now though? Very important. We’re in an environment of repetitive asset bubbles and busts, fraud, inflation and overall excess. We’re in a situation where an adult is needed.