Most investors are still buying into the paradigm that money supply drives inflation. Yet this idea that money supply is the root of all evil is greatly flawed. If you too believe that money supply drives inflation, think again: Money, as we have been used to looking at it is nothing but a smoke screen held in place by wrong ideas about what really drives demand and the economy at large.
Before we get into the finer details of the picture, let me challenge you to re-consider another myth: Many investors believe in the value of gold as a protection against inflation. The idea has no foundation at all. Gold is NOT a hedge against inflation. It is a hedge against government.
You may well wonder where I am going with this discussion, please bear with me while we look at the essence of the reality of money:
Fact: The overwhelming majority of individual investors do not understand money flows, they do not understand cycles. (My next article in this series will discuss cycles)
Fact: Most investors do not understand the universal principles that govern life, and that naturally includes investment life.
As a consequence they are suckered in by the collective beliefs of all traders and investors, authorities who either act on fear or from an ulterior motive of expanding their powers.
People fail to understand that MONEY IS A PARADIGM
Yes, you read this correctly. Money is not solid, or unchangeable. The myth that money is hard to get by and easy to lose is a paradigm that has been promoted by authorities for centuries in total denial of a foundational universal law. The idea that there is a lack of anything is man made. It contradicts the essence upon which the universe is built: Infinite supply brought into material reality through our thinking and acting.
Stop Trading, Start Investing!
Dr. Thomas Carr
The following is adapted from my upcoming book, “Stop Trading, Start Investing” (due out in July, 2015):
With only a handful of possible exceptions, the greatest fortunes ever made in the stock market were not made by quick-turn traders. They were made by long-term investors. For every trader who manages to build a retirement nest egg from trading,, there are literally a hundred thousand stock market millionaires, and a thousand stock market billionaires. None of them made their fortunes by trading in and out of the markets. Rather, they earned their fortunes the old-fashioned way, by prudently investing in, and patiently holding long-term, a select list of high quality stocks.
Consider the following examples:
Until his retirement in 2003, Ralph Wagner managed the Acorn Fund which achieved an annualized return since its 1977 inception of 16.3%. Wagner’s investment philosophy is simple: find stable, long-term trends in the economy and invest in the best companies serving those trends. His value-driven, thesis-centered investing style worked very well. If you had invested just $10,000 with Wagner back in 1977, at his retirement just 26 years later, you would have had nearly $600,000 to your name.
One of my investment heroes is Sir John Templeton, founder of the funds family that bears his name. Templeton got his start in 1939 by putting $10,000 into some of the cheapest stocks on the New York Stock Exchange. He held everything for four years. During that time his original stake doubled twice. Then, armed with a $40,000 portfolio, Templeton took a more disciplined, value-oriented approach, eventually turning his assets into $300 million by 1954, and from there to several billion before he retired in 1992. Money Magazine called Templeton “the greatest global stock picker of the century.” Queen Elizabeth II knighted Sir John for his many philanthropic endeavors. Today, in the wake of his passing in 2008, Templeton’s legacy is the charitable work of his foundation which seeks to support Templeton’s Christian commitment to world peace and spiritual learning.
Even the birds are shouting it off the top of the roofs: The times are uncertain and investing is changing fast.
Investors are potentially facing challenging times ahead, as a massive paradigm shift is afoot which is changing the entire cultural environment and the ways in which we do business and that will affect investors’ psychology as the perceptions of the collective are changing.
The financial world is still in turmoil as Europe is moving closer to the brink of a major change of its system which in my opinion cannot be avoided. Whether you like it or not, Europe is in a state
of decay which is part of a major cycle which cannot be stopped, no matter how hard governments try to kit the broken pot, employing the same old techniques over and over again.
Well, you know what happens when you insist on staying in a rut…
The issue is not so much whether you will be able to make money in the stock market in the next year or two, you will, – rather the real issue is that underlying value systems and belief systems are undergoing perhaps the biggest shift in the last 250 years or so.
Investors need to understand the big picture and become aware what really is driving the changing market environment, if they want to be placed correctly over the next 10 years or so.
Why the foundation upon which the capitalist system was built is changing
Up until the 1940ties capitalism appeared to be the holy grail for anyone willing to work hard and with the common sense to place longer term bets in the stock market or in property. Long term charts clearly reveal that markets have gone up over the long term and if you had the foresight to start cost averaging in a diversified portfolio some 50 years later you would have locked in nice profits in your share or property portfolio.
BUILDING AN INVESTMENT PORTFOLIO-EXPERIENCE IS POWER
Building a well-rounded investment portfolio takes patience, precision and courage. During the 90’s I belonged to a stalwart group of independently-minded women with cash to spare. We met monthly to discuss how to invest our joint monthly savings. We called ourselves the Cash Cows. Our mandate allowed us to invest in anything, but we wanted a fairly aggressive mix of holdings because we were young and earning fairly well.
Meetings were raucous and, looking back, definitely over-fuelled with red wine and pizza. But we all learnt a LOT about how finance works, and how to make a share purchase or sale, and how important it was to manage the books. We knew that investing our money wisely was just as important as checking that everyone had kept up with their monthly subs.
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