Does Money Make You Rich?
August 18, 2009 by Vagabond Investors · 1 Comment
For a decade, I’ve been obsessed with the question: What makes a person wealthy? I confess that although I think that in order for one to be truly wealthy, money comes after excellent health and deeply fulfilling relationships, I am a big fan of money. Philosophical attributes about wealth aside, I am going to talk about wealth in terms of the raw and almighty dollar (or any currency for that matter).
So does money make you rich? We all know people who work 40-60 hours a week, in other words they work hard for money, but fail to become rich. Ironically, many only get deeper into debt with each dollar they get their hands on. We have all heard stories of people who invested in commodities, stocks or real estate and lost it all. Maybe you are one of those people
Money alone does not make a person rich. Hard work does not make a person rich. Businesses, stocks, real estate, commodities or any investment does not make a person rich. You read that right. The explanation is very simple, yet something most people, my former self included, miss.
I’ve seen people win and lose with the same stock in the same market. I’ve seen people buy excellent investment properties and turn them into nightmares (foreclosed investors note). I’ve seen people own profitable businesses only to lose everything the next year. I bet we have all seen people who work hard and never get ahead financially.
So, it’s not the business, investment or hard work that makes you rich. It is information, knowledge, wisdom and know-how, in other words financial intelligence, that makes one wealthy. The asset is not valuable, it’s the information relative to the asset that is valuable.
Too many people invest with little financial education. Partly this is because they have to (remember, arbitrary low interest rates encourage speculation). Many people are also becoming to realize that Social Security and Medicare may not be around when they retire.
I think it is absolutely necessary for average people to learn the basics about money and investing. I am astounded that schools teach little to nothing about money and investing. Instead, people are funneled into jobs and encouraged to spend everything they make. If anything is left over (there seldom is), they are told to hand over their money to strangers who wear suits and sound intelligent. Most people work hard for money for 40 years and never learn the basics of making their money work for them.
It’s no use to blame others or justify the situation. It is time to take responsibility and get educated. Read books, attend seminars and learn the basic language of money and investing. You will soon realize that you know more than your financial planner and you are on a high-way to lifetime financial security, and if you dare, total financial independence.
I invite you to read our educational blog about financial intelligence and markets on our website: www.lessoninwealth.com
Best
Jaakko
Passing The Bottom Of The Stock Market?
April 20, 2009 by Vagabond Investors · Leave a Comment
Have we finally seen the bottom of the stock market? We will know better by the end of this earning season. If the news continue to get worse, but the stock market refuses to make new lows, we will clearly see the foundation of a solid bottom.
So, if you are investing for the long term and you are not interested in the movement of the following months, by all means by the index and close your eyes for six months or so. Your investment could very well deliver its promise on a long time perspective.
As we look at the charts on a weekly basis, we clearly see how the price has moved from a significantly under-valued zone to the value zone. Note that the MACD histogram, which expresses the power of the uptrend, has reached a 10 year high! This tells how the market has been wildly optimistic and willing to buy. However, the wilder the party becomes, the more likely it is that there will be a hangover. It is very possible to see the index take some breath on the following weeks. It would be a healthy to retreat to around 740 points in order to gather strength to a new marvelous rally.
The daily chart shows how the index bounced from the bottom to tingle the upper level of the channel. In order to create a positive mood for the future, the bounce would have to reach the significant level around 870 and close above it. At present, the index is clearly above the value zone, where it tends to retreat to gather momentum. The rallies of the past days have not reached new short term highs.
Even the MACD histogram, which measures the power of previous power, has failed to make new highs. Instead it has fallen whenever there is a higher new high compared to the previous ones. This simply means the deceleration of the rising power. The struggle of the upcoming weeks shall be seen between 740 and 870. The result of that will show if there is basis for further bounce. Patience in timing purchases is no sign of being a sissy. It is simply sensible thinking.
It strongly seems that the longer trend is changing, but we could experience violent volatility during the upcoming weeks when new earnings are announced and the market gathers strength on slightly lower levels. If you are a short term trader, keep your stops tight and practice very prudent risk management.
The ride will be bumpy and it will offer tickly opportunities both on the short and long side. If you are planning a long term investment, it is desirable to make multiple enters to the market over time as this strategy will calm the mind.
I wish you pleasant investing. As always, let’s plan our moves carefully before we do anything.
Best,
Matias
