“Most everyone has tried all sorts of formulas, which work until they don’t.”

I cannot deny that statement and in fact agree.  The key to continuous successful investing in the markets is to first accept that statement as reality, second is having the ability to recognize when a system in use is failing to work as it has in the past, and finally having confidence in making the adjustments that are necessary as soon as possible in order to once more having a viable trading system.

Other important realizations would include:

  • Unless you have conditioned control over your emotions - fear and greed - you will in a majority of cases follow the herd instinct which has been proven to cause losses,
  • Unless you understand and accept the fact that as an investor the odds are designed by “the house” against you from the moment you enter the investment arena, to win requires one to develop some type of system, implement it, and then make minor adjustments as required in order to increase the odds to your favor over the house.  In fact, the best system is the same trading system used by the house, and you as an investor then use that trading system to front-run the trades.
  • Unless one is willing to do their own research instead of relying on the advice of other so-called “experts” - investment advisors / media financial reporters - they most likely will be manipulated into making the trade opposite to the trade of the “big money” investors.  This also implies that one must also be willing to accept full responsibility for all investment decisions that they make.
  • Unless one has also developed a risk management system to use in conjunction with the investment analysis decision system, they will be slow to respond in making adjustments when required in a timely matter.  Diversification is an essential and not an option.
  • Unless one is willing to put in the time and effort necessary to fully understand how markets functions, their return on their investments will be commensurate with their amount of research and knowledge that they have.  They must also realize that the search for market knowledge is a lifetime endeavor.  One can only get back what one first is willing to put in.

These are only but a few realizations that every investor must come to understand and accept if they have made a decision to invest.  Investing is not for the untrained or for those who are willing to place their total confidence in others.  Sound investing first requires one to build a strong foundation of knowlege followed then by building a structure / portfolio using proven analytical techniques to both increase and maintain their wealth over extended periods in time.  Any way one looks at it, investing is both a science and an art which constantly evolves and requires much time and effort to be put forth if one is to acheive lasting success.

A major key component to future success going forward will be liquidity of assets.  Volatility is sure to increase as this crises of confidence continues and therefore one must become properly prepared with a plan of action that is structured in such a way that adjustments can be made in a timely fashion.  Extreme volatility can bring forth both extreme losses or extreme profits - those who have developed a working plan will benefit from this volatility opportunity and those who have not will in all likelihood fail going forward.  Investing is not a game but a serious business and should always be viewed as such - remember always that the others who are sitting at the table are out to first take away the funds you are investing and second to eliminate you (their competition) from effectively competing against them in the future.

The initial goal of every investor is to maintain their wealth (purchasing power) and the second goal is to increase portfolio wealth.  Without a proper understanding of the market rules in play in addition to having a solid investment plan, the average investor stands little chance of beating the odds of the professional investors, who in reality, totally manage the investment arena from top to bottom.