3 Reasons Why Value Investing Works
First of all, I would like to thank all of you who have read my posts, shared with your friends and eagerly asked questions via emails, Facebook, and Twitter. Your continued participation has made my launch successful and I can honestly say that Smart Military Investor is bringing value to your lives. Truly, thank you for your support.
Now most of you are wondering what the next step for you on your path to financial freedom is. You may have battled through the piles of debt or constructed a savings account to reflect 12 months of salary. You may have also budgeted your finances to a point where you have freed up extra money. So much money you can brag that you gave yourself a $2,000 per month raise!
These crossroads in your life are crucial. It could be the difference between running the proverbial rat race or building up your wealth to a point so great that you can take a 6 month long vacation.
This post will focus on building wealth through the dreaded stock market. When you say the words "stock market" out loud, what is your initial reaction? Do you cringe a little? Do you say, "Oh, I can pay someone to do that for me"?
Don't worry, you're not alone. Most people are apprehensive of the stock market.
The simple fact that you are here reading my post means that you want to learn despite how you may feel towards the stock market. It means you want to develop the skill of Value Investing and become a Smart Military Investor.
Before we go on you need to know two things. First, what is Value Investing? Value Investing is the action of finding profitable companies and investing in them long-term. Compare value investing to the standards you set when going on a date. Would you date someone that wasn't attractive, not smart or had bad breath? No, and neither would I. I need the whole package (that's why I married my wife). The same should go for companies you invest in. You should want the whole package from your companies you plan to invest in.
When you buy stocks, you are dating that company. You want that company to treat you good and make you money. That company should sell good products and handle their finances right. Essentially, you want that company to provide value.
Next, you need to know what it takes to become a Smart Military Investor. A Smart Military Investor is someone who uses precision and sound logic to make smart decisions with their money. They budget, invest in good companies and create businesses for themselves.
Learning Value Investing is key to becoming a Smart Military Investor and here are three reasons why:
1. You understand the difference between good business behavior and bad business behavior
In 2008, businesses got a heavy scolding from macro economy called The Great Recession. One can argue it was the biggest economic downturn since The Great Depression. Unethical accounting practices led to a huge economic bubble.
What is an economic bubble? Compare this bubble to that family who has the nice cars, a big house and the latest fashion. This family has a job, but to maintain their lifestyle, they must forgo savings and rack up their credit debt. Eventually, they will go bankrupt because they have no security blanket or investments to save them.
Companies ballooned their liabilities and cooked their books until, one day, that bubble popped. Uninformed investors lost their pensions, but Smart Military Investors either sold their stocks for profit earlier, never invested in those sour companies or a combination of both.
2. You spend less time riding the market emotional roller coaster
When a SMI uses Value Investing techniques, they set rules for themselves. There is no guessing, no worrying and, most importantly, NO SPECULATING.
We don't care who wins presidential elections. We don't listen to those fast-talking pundits on TV who scream at us saying how bad the economy is and that we should hide our savings in a shoe box under the bed.
Value investing teaches you to think first, then act. After the initial research is done, all you have to do is follow your set rules. Buying and selling securities couldn't get any more clear for a Smart Military Investor.
3. You save money on fees and commissions
Uniformed investors know they want to invest, but don't want to do it themselves. They rather pay a financial manager or a huge firm to handle their money. That firm is going to get their cut of your hard earned money for those services.
Since Smart Military Investors know the principles behind Value Investing, we save on those fees an commissions. We use that money and build even more wealth.
Because you are here, I know you have a strong desire to become a Smart Military Investor. Please stay tuned because my next post will explain how knowing basic accounting is key to become a SMI!