Moving Forward by Walking Backwards

For a full five minutes, I actually wondered whether or not to start this post with a hearty and crispy laugh! NO, it’s not because what I am about to say is funny. It is because life is. And yes, we are still talking about making wealth – hopefully, lots of it.

What is funny about life? Actually, nothing, and at the same time everything. It is a matter of perspective. Nothing, if all you see in life is bleakness and hardships. Everything, if you can see the opposite of it. Dale Carnegie, in his book: How to Stop Worrying and Start Living, (The Chaucer Press, 1948) has a line that goes like this: “Two inmates looked out of their cell window, one saw the mud, the other saw the stars.” And they are supposed to have looked out of the same cell window.

How all that relate to our discussion about making wealth is this: In my favorite place, the stock market, people are looking everywhere to find clues on how to make tons and tons of money. Perhaps, the most frequently visited area to look for those clues is the past. So, many of them move forward by walking a bit backwards.

If you are new, and just entering the market like me, among the first things that you will notice as you read thru the ads of brokerage houses and banks offering investment services, (while hoping to find assurances that your money will be safe with them and that it will earn a nice income eventually) is that there are no assurances of earnings and neither is there a promise that you will indeed see your money back at the end of that “risky” tunnel.

Instead, you will be bombarded with their records of past performances. And then they will say that their past achievements are no guarantee of their future performances. Very reassuring, eh? Nope, no money back guarantee. Uh, uh… no assurance of earnings either. But sure, you can leave your lifetime savings with us! Welcome to the wide wild world of stock market investing!

Now, don’t you find that funny? Your money is not insured, they give you no guarantees of earnings and they expect you to, happily and very confidently, leave the product of years of your toils, your blood and sweat, your honest labor, with them! And what have they got to show you? Their sterling past accomplishments – oh by the way – lest you forget, if we talk about the future, that doesn’t mean anything either! Hahaha..!

Like I said, it is funny and it is not funny. It might make you really nervous, even.

But what is definitely not funny, is when somebody comes up to you to assure you that you will get back every single penny that you will invest with him plus maybe five hundred percent (500%) earnings because his company will hit a jackpot in just a couple of days or months or so… Ha!

The difference between the guy (in our scenario) that guarantees you nothing, promises you nothing and show you past performances that may actually mean nothing, and the guy who is promising you everything and giving absolute guarantees about your investments and about your future earnings, is actually just one word – Honesty. Or, maybe, two words – Total Honesty.

Sometimes, it is not that easy to let go of anything that belongs to us if we have no idea whatsoever about what will happen to it. A wonderful future, a promise of happiness and great wealth, an endless bliss, are definitely easier to accept. Unfortunately, those are likewise the tools that make con-men look great.

Our mental picture of paradise is so perfect that we don’t see the imperfections inherent in “perfect places.” That picture just simply cannot be violated. Maybe that is why we are drawn to it. The place looks so pleasant and… well, who wants unpleasant places?

Yet, the guy who is making no promises, who have shown us what he was capable of doing, who is being honest, and who is just showing us the realities in stock market investing, (or any kind of investing for that matter) is the guy who can be trusted.

By asking us to look back and by showing us what he was able to do before, he was actually telling us that what he was hoping to be able to do for us, has already been done and it was done a certain way – his way. That is, as opposed to what the other guy is hoping to be able to do for us – if ever.

History is useful to us. Philosopher and poet George Santayana has one way of putting it, he says: “Those who cannot remember the past are condemned to repeat it.” Our guy, who promises nothing, has another way of putting it. He makes sure he remembers the past, so he can repeat it over and over again. And that will be to our benefit.

But just what is it that he is looking back at the past for? A few things actually: market indicators, charts, economic trends, market behaviors, performances, company profiles, correlations, standard deviations and a host of other things that can point him to the right direction.

It is like drawing a map of a place by asking the people who have already been to that place.

Maybe it will be easier for us to understand what our guy is doing by comparing him to an employer who plans to hire an additional employee.

Usually, the employer would ask for the applicant’s history err… resume’, right?

The resume’ would not tell him exactly what the applicant can really do, but it will give him an idea of what he has already done. Provided, of course, that the resume’ was not written by our other guy, who promises the moon and the sky, who in reality is just a sly.

Looking back at the past performances of the companies that issued the shares you are buying is doubly important if you are trading online and on your own. The reason is simple. No one is doing it for you. This is not to say, however, that you should just leave everything to your brokers or advisers if you can pay for their services.

Maybe you can leave it to them if you already have long tons of money and you are sure that you have already bought their loyalties. Still, I have serious doubts if you will manage to amass that much wealth if you don’t care about some of the important details.

Nothing beats knowing how the market is presently performing compared to its most recent histories.


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