Mindfull of Dollars

Mindful of Dollars

The intent of Hedge Community is clearly defined in uniqueness. www.hedgecommunity.com Of course providing knowledge and information is always a directive for any organization in the investment arena. Yet there many newsletters and informative sources for the basic information of investing. Certainly you want more then the same recycled repetitive information. Our goal is to provide you with thought provoking information that can truly make a difference in your decisions about money. This starts with helping you understand the mental aspects of financial decision making. Let’s clarify that this is not making recommendations or providing you with investment advice. Those exercises are simply a way of passing personal accountability to a so-called professional. While this may be helpful it many times leads to disaster and an overbearing amount of personal guilt.
The present marketplace is full of fear and guilt. How else would any self respecting person deal with loss. Financial loss always leaves a prevailing mist of gloom, doom and ultimately personal guilt. Should of, could of, would have become the on-going self talk. And the cycle begins anew as one attempts to regain that which has been lost. Of course fear makes smart decisions about money less likely.
How can you win and avoid these gaping pitfalls in investment strategy? That is what we want to help you identify. Much deeper than simple recommendations and advice, more valuable then stock picking, tout sheets or any other form of recommendations. We are talking about self identification, personal accountability and consistently making smart decisions about money.
Over the coming weeks and months we would like to take you on a journey of mindful strategy creation processes. These will give you useful tools that can be consistently accessed in order to improve your decision making process.
Today let’s begin with a foundational issue. Any investment strategy begins with suitability. In almost every major loss the primary factor looked at is suitability. We want to start with one factor of suitability (the concept of suitability takes many factors into consideration) that of risk tolerance. Over the years it has been my contention that the one glaring misunderstanding with the vast majority of investors is the personal awareness and full understanding of risk tolerance. The importance of this has mostly been taken for granted. In fact many firms, banks and investment advisories have placed this all inclusive factor into silly quizzes and scorecards to come up with a magic risk tolerance level. Your ability to tolerate risk requires a true reflective personal inventory. It should start with one simple question; how would you feel about losing everything you have? Now you have a starting point to identify just how much risk you can tolerate. Are you an abundant thinker who sees the world in strict terms of plenty? Or are you scarcity driven and see the world in terms of limited amounts of wealth? Of course you can change your mindset, yet you must first identify how you think at present. An abundant mindset makes it easy to take on risk. The fear of loss is much less prevalent for an abundant thinker then it is with a scarcity driven thinker. The first law of any financial gain is that greater reward always requires greater risk. There is simply no such thing as HIGH reward with LOW risk. This is always a formula for loss. In reality the sure thing becomes the greatest risk possible as you will always lose in the sure thing. That is a 100% certainty, don’t believe me, just ask anyone who invested money with Bernie Madoff.
By taking a searching values driven inventory of your tolerance for risk you are preparing a strong foundation for financial decision making. You are also taking full control and accountability for these decisions. This will eliminate guilt and other emotional factors which lead to poor decisions and ultimate loss.
Your perspective on the market will always be in direct proportion to your perspective on risk tolerance. What may help though is a look into the mind of Warren Buffet. He often speaks of his mentor Benjamin Graham (thought of by many as the grandfather of value investing). Graham used the famous metaphor of Mr. Market to explain how to be a successful investor. He said to imagine that as an investor, you are in business with a manic-depressive partner who goes through huge mood swings on a daily basis. One moment he’s telling you business is great and he quotes you a price for which he is willing to buy you out. A few hours later his sunny outlook disappears and he’s all gloom and doom, trying to tell you your company is now worth next to nothing so you should sell now, while you still can. The best time to buy is when he is actually when he’s overly pessimistic and desperate to sell, not when he’s being overly optimistic, when everyone else is buying. The moral just may be that trouble is looming if you become fearful while everyone else is fearful.
Lastly, we feel that integrity is paramount to smart decisions about money. Edward R Murrow said:
“To be persuasive, we must be believable. To be believable, we must be credible. To be credible we must be truthful.”
Integrity is about adhering to a code of conduct. It is the difference between right and wrong and sticking to that code no matter what. In the end what we attempt to produce for you our reader may well be unpopular around the industry water coolers, yet it will be based upon our personal commitment to the integral issues of due diligence, full disclosure and clear transparency. We hope that you will always find it unique and refreshing.