Speculating and Investing

Today, I am going to talk about myself a bit and my experience in investing.  I have been doing at least a little bit of investing for 15 years.  It has consisted of stocks, mutual funds, commodities, options, money market funds, and probably other things that I can't think of right now.

When I look back at the big picture, there are really only two investment strategies that have paid off.  One is in the permanent portfolio (mutual fund or otherwise) that was advocated in Harry Browne's book Fail Safe Investing.  The other investment that has done well is commodities.  This would be mostly gold and silver related investments, but also a little bit in energy.

When it comes to options or just trading individual stocks, I can't really say that I've done that well.  I've certainly had some winners, but I've also had some losers.  When I consider that these things almost offset each other over time, I probably would have been better off paying down my mortgage or putting more into the permanent portfolio setup.

I am guessing that I am not alone in this analysis.  There are very few people who make it big in investing.  Even most people who spend a significant amount of time studying the investment markets do not make out big, unless they are trading other people's money for a fee.  In that case, it is really their job or career.

The problem is that many people feel they need to spend a lot of time doing their homework and watching CNBC for the latest stock tips.  If they only understood the monetary system and understood the power of the permanent portfolio, it would save them a lot of time and headache.  They could spend just a few minutes setting up their portfolio and then basically forget about it, except for rebalancing.

When it comes to speculating on stocks or any other investments, I am probably slightly better than average.  Yet, I still acknowledge that it is usually a crap shoot and that it is impossible to time the markets.  I cannot compete with Warren Buffett at his own game.  Overall, playing the stock market is almost equivalent to playing blackjack in Las Vegas.  In the case of the stock market, the big financial institutions and the government are the "house".  They collect the most money in trading fees and taxes.

It can be fun to speculate in stocks, just like it is fun to play the lottery.  But it really isn't that fun once you realize that you've lost.  So my recommendation to most people is to save their money and be conservative with it.  Pay down your debts.  Invest in something similar to the permanent portfolio.  Then take some money and pay down your mortgage.  If you want to get ambitious, then buy an inexpensive investment property that will generate positive cash flow.  After many years, you will be thankful that you were conservative with your money.  You work hard for it, so you should watch over it carefully.  If you want to speculate, then just set aside a small percentage of your savings as "play money".