Tuesday, March 24, 2009

Make a living or get rich!

Does one want to make a living or get rich? That's the question that every investor probably needs to ask themselves when they enter this business. If the answer is you want to get rich then there are basically three ways to accomplish that goal.

The first one is by compounding over a long term time frame. This is great if one is young and has plenty of time to work with. It will virtually guarantee that you will turn a modest stake into riches if you have enough time and patience to let the magic of compounding work for you.

The second way to get rich is to find a profitable mechanical system and then have the discipline to stick with the system through thick and thin.

The third is to spot a secular bull market, jump on board early and hold on till the secular trend is finished.

You will notice that none of those include timing the market. History has shown repeatedly that over the long haul investors are not going to be able to time the market with any long term consistency.

I know I'm going to get flack from all the pattern traders, technical traders, etc. etc. but I can assure you that history has not changed. The market still has too much randomness in the short term to successfully time your way to riches.

That's not to say that traders can't make a living trading short term moves in the market, they can, especially if they are very good at controlling risk.

However I'm not in the market to make a living or to satisfy an urge for excitement. I'm only interested in getting rich :-)

So decide what your goals are. If they are to make a fortune, then pick one of those three proven methods and get started!