We hit peak Fall foliage over the weekend.
Our favorite tree erupted with the most intense shades of red and orange. And the mountains surrounding our humble property lit up into a collage of colors as if someone were playing with the old children’s toy Lite-Brite.
It’s hard to beat Autumn in the mountains.
Shifting gears…
Let’s talk about investing this week. And we’ll start with this – investing is critical for anyone who hopes to achieve financial security and then financial independence.
Of course, there are plenty of asset classes for us to choose from. We cover each (and how to invest in them) in our Finance for Freedom program.
But today I want to talk about stocks… for a few reasons.
Chances are you have exposure to stocks already. Maybe it’s through a 401k. You may also have other investment accounts set up.
I want you to know that investing in stocks is a simple game.
I’ve been immersed in the world of investment research for over ten years now… and I’ve learned that there are only three variables that control the outcome of any stock investment.
And that’s true in any environment.
It doesn’t matter what the overall economy is doing. It doesn’t matter if it’s a messy election year. It doesn’t matter if war breaks out in the Middle East. It just doesn’t matter.
I’ve talked to many people who see the stock market as a casino. Of those, many think it’s a rigged game. And I agree 100%… if you ignore these three variables.
I know plenty of people who buy stocks based on “tips” or “intel”.
They’ve heard that a new law or regulation is coming that will catapult a small company’s shares higher. Or they’ve heard that a company is about to announce a new product that’s going to be revolutionary, thus now’s the time to get in. Or they’ve heard that some little company is about to ink a major deal with Apple or another giant company, and that’s going to send the stock soaring.
If that’s your framework, you’re not investing—you’re gambling.
Then there’s the other side of the coin…
I know plenty of people who simply herd their money into their 401k funds because they are “diversified”. Those same folks might venture out into the world of exchange traded funds (ETFs) as well, for the same reason.
That’s also gambling… because you have no control over what those ETFs buy, sell, and hold within the fund.
Again, it all comes down to understanding the three variables that determine the outcome of any stock investment. Once you do, investing in stocks successfully becomes simple. So simple, you won’t believe it.
We’ll break down the three variables tomorrow.
-Joe Withrow