Buying what is popular with the expectation of it going higher is a great way to lose money investing

Last week I bought Netflix and boy did I lose a lot of money. Netflix is down about 20% and I didn’t throw a few hundred bucks at it. I threw big money and subsequently lost big money.

In doing this I am reminded of an investment principal that applies not just to stocks but to all investments. For some reason I forgot.

That principal is of course buy low sell high. The problem is that a high can also be a low. So sometimes we buy what is hot, what is popping, what is doing well in hopes that it will continue to outperform and move higher. This is almost always a bad strategy.

The problem is this: The downside on these high stocks far outweighs the upside. Think about it. A lot of people wanted to buy bitcoin at 20k in hopes that it would continue to run. Best case was that it would run to 22k, worst case is what happened, it got clobbered all the way down to 4k. People who bought at 20k lost about 70%.

When you are investing you must stick to your principles and be disciplined. Discipline protects you.

It is better to instead buy that bad, the ugly, the laughed at. This is what Dapper Dan did when he bought up the communities that were devastated by the crack epidemic. Interestingly enough it is what Jay Z didn’t do. Jay Z looked like Dumbo and Dapper Dan looked brilliant.

This is the same way I look at real estate in Detroit. I don’t want to buy what’s hot. I buy what is struggling, what is in terrible condition. In the end we look like geniuses.

Yesterday I made the point that a lot of people do real estate but a lot of people don’t invest. What I meant by this is that a lot of people do what I was telling you, they buy high and try to push it higher. Investors don’t do that, we find the overlooked and make it great again. It shocks me that people in Detroit don’t invest in the hood. Its like we don’t see the value in something until white people see the value in it. Then after they take it and make it great we cry gentrification. Silly rabbits. Learn to see value in your own hood and less in the opinion of others. Their valuations are fake bro.

So the purpose of this post is that investment principles apply not just to stocks but the same strategies and this analysis apply to bitcoin or real estate or art work. Find value and be patient. Don’t’ try to force something and don’t do something just because other people are doing it. You must be the maverick for your family in these financial markets. Do what others are not willing to do and shun what the masses do. Zig when they zag.

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Thanks for reading!

Be great, invest well,

Todd Millionaire

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