The ASX hit 6 year highs on Friday, and has now posted 11 winning days out of the past 12, including six consecutive positive days. My portfolio and SMSF have been on fire — so much so that I've been taking a little bit of money off the table. Don't get me wrong — I'm not calling a market top. Far from it. But I have been building up a little cash over the past couple of weeks, taking profits in some of my biggest winners, to add to a swag of dividends headed my way.
I know Motley Fool Share Advisor stock-picker Scott Phillips likes to be fully invested at most times. I understand exactly where he's coming from. But I'm a little different. I like having a decent chunk of funds set aside to deploy into the market at times of pessimism, or when a stunning new investing opportunity smacks me square between the eyes. I call it optionality.
No… I'm not talking about some fandango trading scheme, the type often spruiked at "investing seminars." I'm talking about the ability to pick up bargains when Mr Market offers them to me, without having to sell some of my stocks that may have been thrown out with the bath water.
I'm the greatest investor in the world…
The market's having a great run. I'm feeling like the greatest stock picker in the world right now. But as night follows day, be assured the worm will turn, often when you least expect it. Markets will correct, crashing 10% in the blink of an eye. Panic will ensue. But the cool, calm, rational investor, with cash on the sidelines, will swan on in and pick up a bargain or three, knowing with the carriage of time, markets will recover, stocks will go higher, and I'll once again feel like the greatest stock picker in the world.
SEEKing the next 140% winner
Speaking of stock picking, Scott Phillips is on a roll, with one of his stock picks — online recruitment company SEEK (ASX: SEK) — jumping almost 20% higher in a single day last week. Including dividends, Seek is up 140% for Motley Fool Share Advisor subscribers who bought in when Scott first tipped the stock.
Showing that we eat our own cooking here at the Motley Fool, I bought shares in Seek a few weeks after Scott's tip. Thanks, Scott.
22 reasons why you are awful at managing your finances
by Morgan Housel
People usually get better at things over time. We're better farmers, faster runners, safer pilots, and more accurate weather forecasters than we were 50 years ago. But there's something about money that gets the better of us. If you look at financial crises, bubbles, personal debt levels and savings rates, I wonder whether people are just as bad at managing money today as they were in previous generations, maybe even worse. It's one of the only areas in life we seem to get progressively dumber at.
Here are 22 reasons why people are awful at managing money.
1. You think $1 million is a glamorously large amount money, when it's the minimum amount most people will need to cover their definition of a decent retirement.
2. You work in a stressful job in order to make enough money to have a stress-free life. You see no irony in this.
3. You work so hard trying to make money that you don't have time to think about, or plan, your finances. This is the equivalent to spending so much time buying exercise equipment that you have no time to exercise.
4. You hate finance, think it's confusing, and don't want anything to do with it. You do, however, love money. You see no irony in this.
5. You don't realise that when you say you want to be a millionaire, what you probably mean is that you want to spend a million dollars, which is literally the opposite of being a millionaire.
6. You try to keep up with the Joneses without realising the Joneses are buried in debt and can probably never retire.
7. You spend lots of money on material stuff to impress other people without realising those other people couldn't care less about you. You'd be shocked at how few people care where your purse was made or how much noise your car makes.
8. You associate all of your financial successes with skill and all of your financial failures with bad luck.
9. Rather than admitting and learning from your mistakes, you ignore them, bury them, make excuses for them, and blame them on others.
10. You anchor to whatever price you bought a stock for, without realising that the market neither knows nor cares what you think is a "fair" price.
11. You say you'll be greedy when others are fearful, then assume the fetal position when the market falls 2%.
12. You're investing for the next 40 years but get stressed when the market has one bad day.
13. You think you can be a successful day trader when the hedge fund you're competing with can read a news report, figure out what it means, and place a trade, make a profit, and exit that trade in literally the time it takes you to click on said news report.
14. You think you're too young to start saving for retirement when every day that passes makes compound interest a little bit less effective.
15. You spend a month researching the best washing machine, fridge or coffee machine then invest many more times in a speculative resources or biotechnology stock based solely on a tip from a person you don't know and shouldn't trust.
16. You're willing to work hard for $30 an hour, but too lazy to spend an hour consolidating your superannuation accounts that could result in thousands of dollars of free money.
17. You start saving a little bit of money. Great! It's better than nothing, but I see a lot of people who are proud of their savings when in reality it's an infinitesimally small percentage of what they'll need to retire. As the saying goes, "Save a little bit of money each month, and at the end of the year, you'll be surprised at how little you still have." If you think saving 30% or more of your income is insane, do the numbers. It might be close to what you'll need to retire happy.
18. You think the stock market is too risky because it's volatile, without realising that the biggest risk you face isn't volatility; It's not growing you assets by enough over the next several decades.
19. You think paying your financial advisor and other money managers 2% a year seems reasonable, without realising that it'll probably eat up one-third or more of your long-term returns.
20. You're unable to have a good time going for a hike, a bike ride, a swim, reading a book, or anything else that's free (or cheap). Having cheap hobbies is a large, yet hidden, asset on your personal balance sheet.
21. You underestimate how fast a company can go from "blue chip" to bankrupt.
22. You nodded along to all 22 of these points without realising I'm talking about you. That goes for me, too.
