Investor Insomniacs? I Don't Think They Exist

9/14/15

Up-All-Night Investors Are Doing Something Wrong

I have three young children, two of them under the age of three. Except on rare occasion, two of them tend to be night owls. To be honest, nights like those really suck. Sometimes at work, I feel like an insomniac.

It can get exhausting, especially when you have a newborn--you can be up five times a night! I can't begin to tell you how prolonged periods of sleep deprivation begin to negatively affect everything from your work ethic on the job, your mood during the day, to your diet, and everything in between.

If there's one piece of advice I can give to you, it would be, don't do anything in life that will keep you up unnecessarily at night.

Anything in relation to money--earning it, saving it, and investing it--should never be one of these things, and they don't have to be.

If you gain valuable skills, training, and education, and learn how to market yourself, earning enough money to provide for yourself and your family will never be a problem.

If you learn from a young age the value and necessity of saving in order to build wealth, saving will come first nature, and you'll always have a safety net against catastrophe.

And if you learn the principles of safe investing, like I try to preach to you on this site, investing will not cause you to lose any sleep at night.

But I've been there, I'll admit.

As I've stated before in these pages, back in college I didn't feel challenged very often, so I would sit in the back of the classroom on boring afternoons and trade stocks on my laptop. I thought I was pretty awesome.

At the time, I was especially into trading commodities-based stocks. So-called "junior" gold and silver miners (risky small-cap stocks), and commodity-based ETF's (exchange-traded funds, kind of like a stock which represents the price of a commodity).

To make things worse, I would end up buying and trading stock options on these investments, which only added to the volatility of my portfolio. Stock options can swing in price by hundreds of percent in one day, and go to zero value the next.

Without getting into too many details, I'll just say that some days, from the time the markets would close for the day, until they opened the next morning, my mind was constantly whirling, hoping, and stressing about where prices would open. I lost countless hours of sleep tossing and turning with insomnia, hoping beyond hope for losing positions to turn into winners the next day.

It was an emotional roller coaster. I wouldn't wish that on any real investor.

The worst part was having to tell my wife about my mistakes. I had to fess up, and promise never to make those mistakes again. Luckily, she's a very trusting and understanding woman--one in a billion.

I haven't made mistakes like that for a long time, and I hope you won't either.

Live the Simple Investor Life

Things are much different for me now. If I were a fisherman, I'd probably refer to my investment strategy as the " gone fishin' " method. When I have some cash and see an opportunity, I buy shares of quality businesses at the right price, with little to no actual fear that I'm going to suffer any kind of catastrophic loss overnight, or even over the next year or ten years. Then I "go fishin'".

The " gone fishin' " method involves picking the right companies to buy, then buying the right amounts in relation to the size of your overall investment portfolio (called position sizing). It also involves not only ensuring that you've placed your investment "eggs" into different baskets to avoid huge losses when certain sectors of the market go into the tank, but also choosing investments which offset one another, so that you are making money no matter which direction the market is moving.

The companies you're buying should be rewarding you, the shareholder, in the form of dividends, which increase over time, and share buybacks. They should have financial statements that look like impregnable fortresses of safety for your hard-earned greenbacks.

Finally, you should learn a few extra tricks to make sure you can squeeze every extra percent return possible out of the investment you are making. In the long run, increasing returns by even just 1% a year will have a dramatic effect on the returns you take advantage of later in life--hundreds of thousands of dollars.

I personally do this by safely using a special type of investment called a "covered call," which I've outlined before. I actually generate an extra 12-15% per year with this strategy, above and beyond all other profits I make in capital gains and dividends.

I've written about this in another of my classic articles, eloquently entitled "Growing Your Money Like a Boss," AKA, "investing for b-dasses."

Once you learn how to do this, it almost isn't possible for you to lose money again, unless you're incredibly STUPID.

Leave the Sleep Deprivation to the Day Traders

As you probably know, recently the market took a dive. And it's possible that this week, with the Federal Reserve making the "do or don't" decision to begin raising interest rates after along 7-year period, we may see even more downside to the stock market.

While the world markets lost trillions of dollars over the past several weeks, my portfolio saw a 4% rise.

Millions of people were tossing and turning at night, while I was sleeping like a baby.

I welcome more downside, not because I want other people to lose money, but because it just means I'll have some opportunities to buy more shares of a few awesome companies which I've had my eyes on for a while, with the cash I raised recently after taking some gains off the table.

I know one thing is for sure: no matter what happens in the markets this week, I won't be losing any sleep over it. If anything, I'll be having the sweet dreams of future financial freedom.

Live long and invest,

Jeremiah