The Orlando Sentinel has sad story about condo flippers in Miami. They put down $100,000 on a pre-construction condo and now either they lose their deposit or they close on a $585,000 1 bedroom condo thats worth less than $500,000.
The sad part is that people fall for these get-rich quick schemes in every cycle. It happened in Miami during the last boom. It happened in the stock market in 2000. Its been happening regularly for over 400 years in every country. If these flippers had only read Extraordinary Popular Delusions and the Madness of Crowds, they would’ve realised that they’re not geniuses, only the last fools to be left holding the bag.
Unfortunately, I was once such a fool. Taken in by the stock market in 1999 and fooled in 2000. Luckily I learnt my lesson early in life when I had little to risk and many years to implement my new found wisdom. I feel sorry for those that learnt this lesson late in life like the retirees of Enron. Life isn’t fair.
But that doesn’t mean you do not do your homework. Your job as an investor is to know your investment inside and out. But also you need to understand the psychology of investing. Human psychology is the common uniting thread across all investment sectors. If it weren’t for human intervention, stock prices would move only 4 times a year – after quarterly earnings are released.
Read all you can about the economy, the stock market and the world in general. Eventually you will become a better investor.
1. Books that broaden your mind