Do you want to invest in the hottest stock right now? Are you craving to find out which stock will triple in price in the next 10 days? Of course you do, it's human nature to want the latest, greatest, sexiest, thing (which in this case is a stock). Nobody would turn down the opportunity to make money fast. But pause for a moment and think about the risk. Is there a chance this hottest stock could drop in value?
History has shown that fads and trends come and go, remember these?:
- Sony Walkman
- Commodore Computers
- Beanie Babys
- Fanny Packs
- Altavista Search Engine
- Tape based Camcorders
At the time it seemed like investing in these products was the wise thing to do, after all "everybody" wanted one. But history has shown otherwise.
As an investor what's important, and what do you avoid? Kelly Wright has the answer:
"So what is the enlightened investor to do? The first thing is that you have to understand is that value is enduring. Fads and manias will come and go but what has always stood the test of time is good value. Yes, sometimes you have to have the patience of a saint while a position goes markedly sideways, but that is okay. You see as long as the company maintains its dividend, or in the case of the vast majority of our Select Blue Chips consistently increases its dividend, you are receiving a return on investment.
At the end of the day return on investment is the sole purpose of investing; putting money in your pocket to spend on your needs or to reinvest for compounding your return.
Avoid investing in fads and manias, forget about the latest hot stocks. Invest in companies that produce products and services that'll be in demand for the next 20-30 years. When it comes to investing patience pays."*
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