This year has certainly been a wild ride for investors, the volatility in the market has been extraordinary, we’re “officially” in a recession and the financial landscape has been dramatically altered. But we’ve been here with you through it all, giving you our best advice. Today, and in several other posts, I’m going to re-print some of the pieces we’ve written in the last 12 months both here on our blog and in our free email newsletter, Cabot Wealth Advisory.
Think of it like reviewing before a test–while there’s no pop quiz at the end, there are always new investing challenges to tackle, and reviewing lessons learned in the last year can help you meet them head on.
And last but not certainly not least, here’s Timothy Lutts, Cabot publisher and editor of Cabot Stock of the Month Report, writing on March 3 about three steps to successful investing:
“Back in 1931, Humphrey Neill, who later became famous as the Vermont Ruminator, but was then vice president of Wetsel Market Bureau, Inc., wrote a book called “Tape Reading and Market Tactics–The Three Steps to Successful Stock Trading.” It was published by B.C. Forbes Publishing.
“In 1970, it was reissued by Jim Fraser of Vermont, and last year it was reissued again, by Marketplace Books. You can get it on the Internet for about $10.
“The copy I pulled off my shelf last week is from the original edition, second printing in March 1931. It was first owned by Lester Vernon Parmelee, who signed his name both on the flyleaf and inside the back cover, and affixed his bookplate, complete with the Parmelee motto, Beatus Qui Patitur, or “Blessed is he who endures,” inside the front cover.
“A little research reveals that the Parmelees settled Guilford, Connecticut, in 1639 (and some endure there today), but that Lester was born in Los Angeles in 1896 and died in 1966. He never married.
“My father bought the book used in 1951, apparently for $5.00 (the price penciled on the inside cover) and affixed his own bookplate, and though he retired from Cabot four years ago, his valued books remain here in the office, enriching those of us who are still willing to learn their secrets.
“So what are the Mr. Neill’s three steps to successful stock trading?
“The first step is familiarizing yourself with the methods of the institutions that move the market.
“The second step is learning how to interpret the actions of both these groups and the investing public.
“The third step (and hardest of all) is achieving mastery of yourself; of the “temperament, emotions, and the other variables that go to make up human nature.”
“We write about all three of these issues frequently, but we don’t spend much time on the first; we simply accept that institutions have the power to move the market.
“We do spend a lot of time interpreting their actions, reading charts to determine whether stocks are under accumulation or distribution or just simply ignored.
“And we spend even more time on the third issue, working to teach you, the individual investor, that the greatest obstacles to success lie in those variables that make up your own human nature.
“The biggest obstacle of all, of course (if I’ve written it once, I’ve written it a thousand times) is the inability to cut losses short.
“Humphrey Neil said it way back in 1931; “The one thing which retards success in trading, more than any other, is the unwillingness of many of us to accept losses, cheerfully and quickly, when we realize that we have misjudged the action of the market.”