Creating a Plan

Hello everyone,
It has been a while since we last spoke, and I would like to again make a new suggestion to those who are hungry to invest. Investing can make you millions, and can make you lose millions too if you are not careful. One of the most powerful, and also most difficult idea to maintain, is to have a plan. Whether you are a real estate investor or stock, options, or futures investor, having a plan is THE cornerstone to any investor's career and to invest without one is dangerous.

I believe most people fail at investing because they is no plan. I am defining failure not only as losing money, but also not making money. Now if your plan allocates your investments returning only 5% a year, and you have defined this and met your goals, then your plan is a success! But if you throw your money into a 401k program, with no definite plan in mind of where you want you money to grow, then how can you call yourself a successful investor? This is typical of how a gambler plays; throw your money on the table, pick up the cards dealt, and hope you have the winning hand. There is no control here, no matter how well you define your skills to interpret your conditions.

Not having a plan introduces demons with your investments. First, the lack of rules creates an environment where conditions will affect your position that could be controlled otherwise. I am talking about setting up criteria in an investment, such as not buying a stock unless it matches a set of rules, or even not buying a property unless it falls into a certain window of characteristics. In example, if you have a rental property, and are having issues with cashflow because tenants are moving in & out, you could set a rule where you require a tenant to sign a longer term lease. Or with stocks, you may set a rule where you only but a stock that is in an established uptrend.

Second, be consistent with your rules. Don't deviate. How can you know how your program is working when you are changing it to fit your desires? Not every investment is rosy, especially now. So why would you deviate from rules that define your ideal investment? Sure you may take less trades, buy less properties; but the investments you do make will be well defined, and more profitable overall. John Wayne didn't go to Wall Street for a reason, so don't be a John Wayne there either.

Lastly, greed is not good. It clouds the mind. Motivation, and the desire to become a better investor is good, but often this feeling and ideology will morph into greed. Be aware and avoid this completely.

Until next time,
John