“Price is what you pay; Value is what you get.” Warren Buffett
The best investors tend to invest differently then the typical Wall Street and retail investors. The best investors don’t follow the crowd, or allow the emotions of fear or greed influence their savings, investing and building wealth decisions. Since, most people are in debt and are not building long term wealth.
They, the best investors, follow an analytical process to assess the value of an asset. They understand the difference between an asset’s value versus an asset’s market price. They understand that it matters how much you pay for an asset. And, they will not pay a price for an asset that far exceeds that asset’s value.
Emotional investing causes losses over the long term
- Buying assets at market peaks or all time high stock valuations
- Selling assets during times of high volatility and market corrections.
Avoid making the following investments:
- If you don’t understand how a company or investment makes or loses money.
- When the price of the stock (or investment) is greater than value of the company (or investment). It matters how much you pay for an asset.
- If the asset class is at euphoric high.
- When making investing decisions based on emotions or fear of missing out (FOMO), and you’re not being patient, disciplined and objective.
“The goal isn’t more money. The goal is to live life on your own terms.” Will Rogers
- Freedom from work and trading time for money.
- Freedom to live life intentionally and purposefully on your terms. You want the ability to take time off when you want and as long as you want.
Annually, financial planners and brokerage firms still make money off your money even when you lose money. Most financial planners, 95% of them, fail to outperform an index fund over a ten and twenty year period. No one can or has successfully predict the future, that’s why barely 5% of financial planners have out perform an market index fund over a ten to twenty year period.
Don’t forget, you will lose a large portion of your tax deferred retirement nest egg to federal and state taxes when you start withdrawing or commence taking required minimum distribution (RMD) from the accounts.
Cash flow is your monthly earned and passive incomes minus your monthly cost of living expenses.
References:
Everything Money