Why Do I Always Lose Money?

Like most people, I'm not an investment pro. I typically lose money in whatever I invest in. My biggest accomplishment from the tech boom is that I received years of tax loss credits. I became so afraid of the stock market that I avoided it when I should have been buying. Instead, I bought real estate, apparently like everyone else, including subprime borrowers. And now look, real estate is in the worst shape it has ever been in decades. What the heck is wrong with me???

So I ask myself "I'm a pretty smart guy... Why do I always seem to follow the herd? Why Do I Always Lose Money?"

To try to figure out what I did wrong, I surfed for the web for years seeking answers on where to invest. I surfed chat boards, pay investment sites, etc. I couldn't find very much that didn't have an agenda or that gave good advice. But I couldn't find anything giving me good, real, free, UNOFFICIAL ADVICE. I did find a few websites that were good in helping me learn about individual sectors or investment types, but nothing that tied them all together for me. That is the point of this blog. To bring the big picture together and to try to get some "experts" to help me and other people out.

Now, back to analyzing where I went wrong:

• I invest emotionally. I am unable to cut losses or take profits. I believe in "Buy and Hold"
• I pick "blue chip" stocks that don't do anything or I try to hit a home run with unknown stocks.
  
• There is just something sexy about finding the next Microsoft, that always seems to lead me to Technology stocks, but I always seem to miss the high flying stocks that just keep going higher.
• I am not diversified. I don't have the proper asset allocation of real estate, stocks, bonds, cash that I should. Specifically in stocks, I am also not diversified by sector.
  
• I'm not in sync with the business cycle. I sell stocks when I should be buying them. I don't invest in bonds at all. Real estate is confusing.
• I pay attention to my investments for only a little while after I make them, then I forget about them. When I do pay attention again, its because I've lost money, which causes me to panic sell.
  

Is it just me? What can we do about it? I searched high and low and gathered the following [unofficial advice] that seem to make a lot of sense:

• Buy low, sell high.
• Rule #1: Never lose money.
  Rule #2: Don't forget about rule #1. - Warren Buffet
• Be fearful when others are greedy
  and greedy when others are fearful - Warren Buffet
• Asset allocation explains investment performance.

Okay, Okay. I know what you're thinking. Everyone knows these basics. It's easier said then done. After some thought, these are my takeaways:

• Be suspicious of what the media says. Use it to determine market sentiment. Think for yourself. Don't be afraid to be a contrarian.
  
• There's no need to research and follow hundreds of stocks or pick the right stocks. Use technical analysis and high level knowledge of the business cycle when timing your stock investments. Then invest in known and obvious trends (More posts later on this).
• TAKE PROFITS and don't be greedy. This enables you to have cash for when the media and everyone else is fearful.
• Don't overextend yourself in investments. Don't invest money that you need.
  

With the economy in uncertainty, I think this is a great opportunity to "reset" my portfolio to mostly cash and to take my time to try to make the right investments at the right time.

The purpose of this blog is to think publicly about the problems that I am facing in investing, the economy, bonds, stocks and real estate. I hope you will follow along by posting in the comments.

Learn with me.
Learn from my mistakes.
Help me because I'm Seeking Your Unofficial Advice.

Stay tuned for more blogs with more specific topics and questions.