Investment Models and Strategy Introduction: Part 1

Why You Need an Investment Model And an Investment Strategy!

Since I started this blog on Corporate Bond Investing back in late November 2008, the stock market has fallen more than 25%. From the stock market all time high in 2007, the fall has been almost 60%. In all this time, the experts have been telling clients to "Stay the Course." If you had, you have gone down with the ship. So the evidence shows that the experts have no clue what they are doing. It is not that your broker or your brokerage firm is incompetent. Their problem is that they never experienced a market like this before. Never have I. However, as a student of market history, I have looked at financial markets going back 200 years and anyone who follows stock and bond markets would have seen this mess coming from at least 10 years ago. In my book, "Building Wealth With Corporate Bonds," written in 2004, talks about investments in the stock market. I say that it is a very bad idea. It is next to gambling.

Brokers go to class to learn how to sell stocks, mutual funds, and other securities to clients. In college, they are taught how to sell products/services, manage companies, and purchase products/services. They are not taught how to react to changing investment and business situations. On the job, people learn how to keep their mouth shut and get promoted. The person who can play the best corporate political games moves to the top. The person who knows what is going on and speaks out stays on an entry level. So it takes about 30 years for your incompetent people to rise to the top and mess up everything from the economy to your small business. I am talking about people like George W Bush, Bernard L. Madoff, and the leaders of GM.

Here are the reasons why the world economy is in the situation that it is in today; top political leaders corrupted; business leaders walking away with billions while their company goes into chapter 11, laying off most of its workers; and your broker telling you to stay the course while you watch your returns decrease as much as three percent per month. The stock market will come back one day. The stock market came back from 1929, in 1956. If you can wait that long then the stock market is for you. But if you are in this to make money then you may want to do what people have done from the beginning of the Twentieth Century to the 1970s. That is to create an investment Model for yourself. From that, create an Investment Strategy.

Your Investment Model includes these three things; financial (like a house), temporal (such as time spent together) or emotional (such as in the welfare of the children). When I was Eight Years old, I started developing my investment model by looking at people in several stages of their lives; my sister and brother who was in their early and mid teen years, older teenagers, people in the area who were in their 20s, married people with children, people in later stages of their lives, and the retired old people. I started looking at their needs, their problems, and what they were doing to fix their personal problems. Looking at these things gave me an idea of what I wanted to do, how I wanted to get there, and what to avoid. Now your model and strategies are a "work in progress." At 8 years old, I can't be set in my ways because in the next 60 years, I have to adjust to future economic and social conditions. In 1959, I did not know that I would live under a Black President, let alone that I would be able to eat at the best restaurants in town. In 1959, in many places in the country, I was not allowed in the business establishment or use their bathroom.

Your Model and your strategy is personal. No one knows where you want to go in life better than you do! It is best to get ideas from other people but other people's top priority is their interest, not your interest. That is why no one prepared you to be in the Blue Jay group instead of the Red Bird group in second grade. No one taught you how to play basketball early so that you can be on the championship basket ball team in High School. That is why your next door neighbor got into Yale while you went off to work at Wal-mart. That is why the people running your 401K told you to "stay the course," while your investments fell 60%. That is why Obama, the son of an African, is President while you sit at your desk worried about being next in your company layoffs.. Your family has been in this country for the past 400 years and no one has gotten past entry level employment. It is all because you and your family had no Model and no Strategies. They did.

Next let's talk about creating that strategy to finance that model.