If you have an Exponential Mindset™, you MUST ask yourself
“What do sophisticated investors do in times of crisis like this?”
I call it the Coma Investment Principle™ and it’s one of the 3 reasons I became financially independent at 42 years of age.
Imagine you make a stock investment and as soon as the trade is concluded, you lapse into a coma. You wake up days, weeks, months or years later. How will you know if you wake up happy with your investment?
The answer is obvious – the lessons are not.
If your return is MORE than you expected, you’re happy. If not, you’re disappointed or depressed.
This is never more true or important than in times of crisis like we’re in right now.
You’ve heard it before “buy low, sell high.” Easier said than done when EVERYONE ELSE is selling and all you hear is doom and gloom… I won’t even waste your time or mine trying to explain the perils of trying to ‘time the market’ – because that is just plain STUPID.
So what are the lessons from the Coma Investment Principle™?
You usually don’t fall into a coma after making a trade. Instead, you track every single daily (hourly?) up and down movement and rarely, if ever, play the trade/investment through to your original “decision-making horizon” – the period over which you originally invested.
Many investors invest with a “let’s see what happens” approach that has them constantly second-guessing themselves, creating immense levels of stress and sub-optimising their returns. If the stock goes up, they might sell prematurely, if it goes down, they might sell at a loss in fear of a further drop.
You need to approach your investments KNOWING ahead of time your particular decision-making horizon for EACH one, so that you can appropriately mix and match investment size and risk/return with the decision-making horizon in mind thus MAXIMIZING returns and MINIMISING stress and lost opportunity (costs).
Guess what’s happening right now? Everyone around you has NO HORIZON – they are panicking and can’t see beyond TODAY… That is FINANCIAL SUICIDE.
The second lesson is selecting the right investment for the right decision-making horizon. Some investors ‘day trade’ stocks whereas others have a buy and hold strategy – BOTH benefit from knowing how long their horizon is. The worst thing you can do is buy, hold and lose sight of time. Returns are TIME DEPENDENT. A 100% return sounds great, but if it took 10 or more years, in today’s terms, that is a very poor return on capital.
So, how do you select the right stocks with a decision-making horizon in mind? You must MATCH the projections of growth with YOUR horizon. If a company has a 3-year plan that is attractive, but your decision making horizon is 1 year, that’s a sub-optimal match that just won’t work.
Stuck with stocks and don’t know what to do?
Get rid of impaired stocks – the ones that have changes in their fundamentals. If the fundamentals of the company, industry and/or clients have not changed – HOLD ON TO THEM.
Make the trend your friend and match it to your horizon as much as you can. If a company has an aggressive growth strategy within a bigger trend (e.g. commodities) that you believe they can deliver on AND your horizon and their projections match up, it’s definitely something you want to consider and put on your short list.
This is what you want to look for when the worse has passed – to PROFIT on the way back up. Listen to the experts that you KNOW have the right approach/strategy/mindset. I follow only ONE expert’s advice and that a secret I share with ONLY my most trusted friends and most elite clients (Platinum and Diamond Members). He has NEVER called a market trend wrong, but has never been part of the ‘herd’ either…
Choose your ‘experts wisely’.
Check their long-term records ESPECIALLY how well they do avoiding and recovering from crises like this one.
When you’re in a coma, you can’t keep researching and over-analysing every option available. When you are awake you can – but that doesn’t mean you should. Of course there’s a fine line involved and interpretations of this lesson will vary between investors, but Warren Buffett is notorious for sticking to his horizons even when everyone’s telling him he’s wrong. His bank account is proof that he knows something few people ever learn!
Watch and listen carefully who is panicking and who isn’t. That will tell you everything you need to know and what you should be doing when you’re ready.
Last and most importantly – you can use this secret to unlock unlimited opportunities in other investments you make – be they in real estate, projects, personal or entrepreneurial ventures. Once you KNOW how long you’re in for, you can make the necessary time, effort and resource commitment to ensure a stellar return or outcome.
When you match them up, it’s like all the stars in the universe lining up and magic starts to happen. When you don’t it’s as if everything is conspiring against you producing disappointing or disastrous results.
What crises can you predict in other aspects of your life? What would happen if you acted BEFORE the crisis occurred? What could you exploit if you had a Decision Making Horizon that extended beyond everyone else’s?
Hmmm… something to think about.
The most simple secrets are often the most powerful and valuable, like this one – every single successful ‘master’ investor alludes to this concept and I can guarantee you it’ll improve your results. How much? As much as you abide by its principles!
Onward and upward!
Dr Marc Dussault
I realise that for many, this advice comes too little too late, but then again what we do is ensure people adopt an Exponential Mindset™ that allows them to see the world via a different perspective and achieve extra-ordinary results BECAUSE of that viewpoint.
Think about this strategy whenever the doom and gloom gets to you – if you don’t you’ll get sucked into what I call the Vortex Of Mediocrity™. It is a force that is more powerful than gravity!