“Everything is in a constant state of change, and the wise investor recognizes that success is a process of continually seeking answers to new questions.” Sir John Templeton

I watch people make the same mistakes in investing over and over again. And it’s not limited to amateurs. They panic and sell out when it is low. They chase the new hot investment trend just as it’s peaking.

Look at some of the huge public and private pension plans. Many are seriously in trouble because of their losses. They can’t even come close to paying their obligations.

At the height of the tech boom in the late 1990s article after article advised, “You can’t lose money in tech stocks.” Record amounts of new money poured into tech stocks in early 2000 just as it peaked in March. Then they broke and cascaded down for the next three years. Many people lost everything. They had invested in companies that had no profit and in some cases not even a product.

Fast forward to 2006. We’re in the midst of the real estate boom. News articles proclaim, “You can’t lose money in real estate.” The news tells stories of overnight millionaires who left their jobs to flip homes. People who had never invested in real estate before were suddenly buying and selling full time. For every house they sold, with their profits, they would put small down payments on two more. Within a year people who before hadn’t owned any real estate now owned 10 houses. Then in 2008 the music stopped. A lot of people were left holding houses, with negative cash flows, that no one wanted to buy. Within a year most were worth less than what was owed. The speculators lost everything.

Yet I see others who continue to be successful year after year. Just lucky? I don’t think so. Without exception they’re the ones who take a careful, reasoned approach to investing. They don’t get caught up in fads. They educate themselves and invest when the price is right in companies and properties that will appreciate over time.

They probably miss a few spectacular deals along the way. But they also miss the spectacular blowouts. And slowly they amass wealth.

I like what John Templeton says. We do live in a constantly changing world, changing at a faster pace than ever. So we need to stay nimble. Change with it.

Where some get themselves into trouble is when they try to take the easy way out. They read a couple of magazine articles or go to an evening dinner seminar on investing.

Or they watch the financial news on TV where the talking heads are screeching about the latest world catastrophe. Or touting the latest investment fad. It’s tempting to think, “Hey, that’s easy. I can do that.” And they jump in right at the crest. Then when the bottom falls out they wonder, “What happened?”

So what do we do? How do we get out of that cycle and consistently build our net worth?

Templeton gives part of the answer when he says to, “continually seek answers to new questions.” His point is even the questions are changing.

Proverbs says, “Blessed is the man who finds wisdom, the man who gains understanding, for she is more profitable than silver and yields better returns than gold. Long life is in her right hand; in her left hand are riches and honor.” (Proverbs 3:13-14, 16 NIV)

There are two perspectives here.

First, gain understanding.

We need to educate ourselves. Grow in our knowledge. This is the only way we can stay up with the change.

A few practical steps.

1. Read rather than listen to the news. TV financial news is slanted to get us emotionally excited, the opposite of good investing. They want us to buy the products the advertisers pay big dollars to advertise. We need to pull ourselves out of that emotional rollercoaster.

2. Read reports and articles from trust worthy, reliable sources. This is one reason I write this blog weekly and send out regular reports to my clients. I want people to get another, non-sensationalized view so they can make calm, rational decisions.

3. Read a good book on financial success and investing. You won’t become an expert. But it’ll give you a foundation for analyzing investment advice.

4. If you aren’t going to become an expert then work with and trust someone who is. If we choose to be emotionally steered by the news media we’ll end up where they’re guiding us—in a ditch.

But the writer adds something else. He says to gain wisdom. And he isn’t he just repeating himself.

Wisdom is God’s guidance.

He says we can connect to the ultimate source of knowledge. It comes out of our ongoing relationship with God.

Then I love what’s promised — Divine direction.

That’s a whole lot better than gaining some quick money which just as quickly evaporates. Because it leads in the long run to abundance and a life well lived. Now that’s living richly.

Are you ready for the changes? Are you living nimble? It will make all the difference.

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Important Disclosures:

Douglas Armey, the LPL Financial adviser associated with this website, practices in Fresno, California and may discuss and/or transact business only with residents of the following states: California, Idaho and Oregon.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results.

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