I thought ABC Inc was a great company. Why is my investment losing money?

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It was the best of times and it was the worst of times.  Or so we thought.  Just last week our stocks were booming.  We crushed through Dow 20,000 and S&P hit a record high.  Its a celebration! *Dave Chappelle voice*  Then we got some bad news over the weekend about “bans” and protests and we proceeded to see the market slump.

This post is to inform the novice investor, and our wonderful members, that these dips are normal.  The market never goes straight up and the market never goes straight down.  Instead it goes either up and down through trends (mini booms and mini busts).  This means that your highs will take dips along an upward trend-line.  You have to learn to see these dips as opportunities and/or the cost of doing business.

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Opportunities

Buy low and sell high.  I don’t know how many times I have said that on this blog but that is how the game is played.  Unfortunately most people do exactly the opposite because they are driven by emotions: fear and greed.  When the market is booming people are inclined to buy more (buying high) = greed.  When the market is slumping people tend to head for the hills and sell (selling low) = fear.  As the saying goes “bulls make money, bears make money and pigs get slaughtered”.  Don’t be a pig.

So if the game is buying low and selling high, not what sell low and buy high we have to go against our instinct and use these DIPS as OPPORTUNITIES to buy MORE.  You have to have the guts to take action though.  I addressed this in my article about contrarian investing. Emotionally you want to sell when the stock is in the hole but if you don’t get a hold of your emotions you will never be able to properly manage money.  I know our members probably hate Under Armour right now but NOW is probably when we should be selling off our winners and plowing it into more UA.  This is the beauty of the team, we hold each other to the fire.

We have to learn how to be greedy when others are fearful.  This means that these lower prices are just the market going on sale.  These are discount goods now that will be priced better (aka higher) later.  That is where the profit lies.  I know that its unique to think along these lines because most of your peers don’t think this way but if you continue to think along the lines of your peers you will continue to live life how they live it.  Are your friends wealthy?

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Cost of doing business 

A lot of us get sold on the glamour of investing and entrepreneurship not knowing that it hurts.  It hurts to lose money but this is just what it costs to participate in the game that is the stock market.  These are the costs that shake out the ones that don’t really want it as bad as they say they want it.  People are hoping to shake those shares out of your hands at a discount so they can gobble them up.

Stay in the game, continue to double down on the game because it will have to pay off sooner or later.  Just ask the investors who sold at the bottom of the RE market who are kicking themselves while the investors who bought at the bottom are ringing the register.

Learn from my mistakes.  I have been doing this for some time and everything I share here is based on what I have done wrong and what I have done right.  From experience, I have consistently seen great companies bounce back.  It just happens. If you see the stock down you have to invest in that dip and invest HARD.  The worst thing you can do is sell, eat your losses and miss out on the impending rally.

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Warren says

If a company is a good company it is good no matter the price.  If you follow this blog you have seen Warren quoted multiple times.  Warren is the ultimate business man and investor and someone I believe we should model this club after.  Therefore, going forward, I want to plug in some Warren Wisdom to validate my original thoughts.

Warren Buffet is famously said that “[i]t’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” When you are buying a stock keep in mind that stock is tied to a company.  Shift your thinking from stocks to companies.  Shift your thinking from charts to fundamentals.  If the company is a great company (great brand, customer base, growth prospects, track record) we shouldn’t be concerned about the price it trades at intermittently.  In the end we win because the cream always rises.  If you are interested in joining our investment club please email us at info@capitaltodd.com

Lets all be millionaires,

Todd Millionaire

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