Five reasons why my way works

http://www.financialiteracy.us/wordpress/2010/10/05/five-reasons-why-my-way-works/

My mission, when I started this blog, was to persuade my readers that “investing,” is not what the securities industry has spent gazillions convincing everyone it is: betting on the stock market, which is risky and unpredictable. Rather, “investing” is a simple means of earning money with your money. It can make you wealthy and is virtually risk-free. 


Here are five reasons why “our” way works, and “their” way doesn’t.

1. “We” seek to be part-owners of companies that have a proven track record of making money for their owners. “They” buy stocks because their stories sound good.
2. “We” judge the quality of the companies we invest in by examining their fundamentals—their “lifeblood” and “vital signs.” “They” use technical analysis to decide when to buy and sell—a popular attempt to predict the unpredictable, with no record of consistent success.
3. “We” know, from history, what multiple of profits would be reasonable to pay for shares of such companies. “They” ignore such fundamentals and can only guess at reasonable purchase price.
4. “We” rely upon an increase in the actual value of our holdings over time to justify selling at a profit. “They” must rely on luck or someone else’s ignorance to profit from the transaction.
5. “We” value our portfolios according to their potential—their rational value—because we own shares in companies whose operations continue profitably, regardless of the fluctuations of the stock market. “They” value shares according to their “market value”—whatever they’re selling for at the moment—because “they” don’t have a means of setting an absolute value for those shares.

The only thing “they” have going for them is excitement. There’s nothing like the rush that comes with risk! Especially when you bet your life’s savings on something as uncertain as the stock market.