Why you invest

You need to learn about investing sooner or later in your life. You need to take some calculated risks.

Compare the returns of the following assets: cash, CDs, treasury bills, bonds, real estate and stocks. We start with the risk-free investments and end with the riskiest. It turns out that the average returns are in the opposite order. Cash and CDs are not risk-free as inflation eats our profits. For example, the real return is negative for the 2% return in a CD and a 3% inflation rate. In addition you have to pay taxes for the ‘returns’. Our capitalist system punishes us for not taking risk.

There are two kinds of risk: blind risk and calculated risk. If you buy a stock due to a recommendation from a commentator on TV or a tip, most likely you are taking a blind risk. It would be the same in buying a house without thoroughly evaluating the house and its neighborhood. When you buy stocks with a proven strategy (i.e. when/what stocks to buy and when/what stocks to sell), you are taking a calculated risk. In the long run, stocks with calculated and educated risks are profitable.

Be a turtle investor by investing in value stocks and holding for longer time periods (a year or more). “Buy and Monitor” is better an approach than “Buy and Hold” as some could lose all the stock values such as in the failure of Enron.

For experienced investors, shorting, short-term trading and covered calls would make you good profits. Simple market timing would reduce your losses during market down turns. If you buy a market ETF and use my simple market timing, you should have beaten the market by a wide margin from 2000 to 2019.

With so many frauds and poor management, do not trust anyone with your investing. Do not buy investing instruments that are highly marketed such as annuity and term insurance.

If you are a handy man and do not mind to satisfy the constant requests of your tenants, buy real estate in growing areas could be very profitable in the long run.

Take advantage of the tax laws such as investing in a 401K especially the part that is matched by your company and/or a Roth IRA.

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For more of my reasoning, check out the book described next. The Kindle has 850 pages (6*9) for $9.99. It could be the best $10 you ever spend.

The above is an abstract from my book "Complete the Art of Investing" which is available from Amazon.


I challenged to have the best-performed article in Seeking Alpha history, an investing site, for recommending 5 or more stocks in one year after the publish date. The concepts for that article are discussed in this book.

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