The most valuable ideas come from those who are going to be rich, not from those who are already rich. Given 2 people, one of which started with nothing and earned a million dollars and the 2nd who inherited a million dollars — I know where I’m betting my money. As my friend John Lux pointed out to me, there’s another perspective to risk. There’s alpha risk and beta risk. Alpha risk is buying something that goes down and beta risk is not buying something that goes up. Avoiding these two risks generates obscene profits. I’d argue that by simply avoiding alpha risk, you’ll still generate obscene profits. You don’t need to buy everything that goes up.
The stocks I am buying are not risky, in comparison to any of the companies on the S&P500. I’m paying a little and getting a lot. What would your retirement plan look like if every $1 you put in today put out $1 every year going forward? So, you put down $60,000 and you get paid $60,000 every year going forward? Sounds too good to be true? You’d think so… In March 2009, it was more like putting down $60,000 and getting paid $240,000 each year going forward, and at a growth rate of 30%+. Talk about a great retirement plan! How do you think you make 20x your money? The value goes from a P/E of 0.25 to a P/E of 5.
Everyone else likes paying retail. They tend to pay more than 5x what I’d pay for the same company. Some of the companies I find they like to pay 10x more for. Ironically, the fastest growing sector in the world is the cheapest. This is great for me, because I’m making a fortune simply by making obvious decisions. I’m telling you that it may take a while, maybe 5 years, maybe 10. Who cares? These stocks at some point in time are going to destroy every index.
There are a lot of people out there that are concerned about what I would consider to be minor fluctuations in price. If the price is going from $1 to $10. Is it really a problem if it fluctuates plus or minus $0.50 when it’s trading around $1?
It’s all a matter of perspective.