Why invest in common stocks? This question thinly veils the deeper question: why accept the risk? An investor has to balance two basic emotions common in all humans, but potentially devastating to investment activity: Fear & Greed.
The Stoic Investor attempts to pursue his goals with little influence from either fear or greed. Markets will rise and they will fall repeating the cycle several times throughout an investors life. However, these economic cycles, emotionally disturbing as they are, should never have much bearing on the investors decisions made at times of rationality. Taking an overly myopic view on any present set of circumstances is perhaps more damning to an investors success than any other factor I know of.
It is with the above in mind I make the following declaration of intent for my investment activity:
- Slow, consistent maximization of wealth over time through a combination of above average savings rate and acceptable investment return while maximizing the good life in a frugal manner.
- Financial Independence measured by investment activity producing returns capable of covering living expenses and keeping up with inflation.
Update (6/4/2014) I wrote the above when I first started this blog back in Jan. 2012. I was about two years into a three year stent of working overseas as a Paramedic. Having saved a good deal of the income I was making and paying off over 50K in debt I knew I needed to do something with the cash I had saved and so I turned to investing and was fortunate enough to have the good sense of embracing Dividend Growth as my approach. I made decent progress from Jan 2011-June 2013 but liquidated my portfolio in June 2013 to look for a real estate investment. After returning home I decided I wanted to try my hand at a real estate investment and at the time of writing this update I’m finishing up the rehab with the intention of selling or renting when it’s completed. My focus is the same even if my approach is different: find undervalued assets and sell for a profit.
These days my intent is more about living a “good life” and I know that any conception of that idea has, at its foundation, strong economic roots. Going forward I intend that all of my investing and personal finance decision will have at its core my idea of what it means to live well. I’m just pissed it took me so long to figure it out! ;-)