Inspirational
DALE EARNHARDT WINS THE DAYTONA 500--HOW HE DID IT
The shortest distance between two points is a straight line. In investing, a straight line is everything working out exactly as you expected. You know this does not happen. When you are driving your car from point A to point B the shortest distance is a straight line.
However, no one drives in a straight line even if your destination is a straight line from point A to point B. Have you ever driven on the turnpike and not zig-zagged? You change to the passing lane to overtake another car. Once that is accomplished you change back to the right lane. In essence, you zig-zag in an effort to go straight. This is what we do in investing. The best investors, like Warren Buffet, make as few changes or zig-zags as possible and move in a straighter line than most investors. The investor who is always trading back and forth for short term gains usually loses. He is constantly zig-zagging all over the road and is lucky if he doesn't go off the road and hit a tree.
Let's look at a race car driver to further illustrate this principle. Think for a moment what Dale Earnhardt is doing when he wins a race. His car isn't that much more superior than the rest of the pack. If you asked Dale Earnhardt what it takes to win a 500 mile race he will, in some way, tell you that he drives a straighter line over the course of the race than his competition. He optimizes the variables he has to deal with in the race. Dale Earnhardt has a solid game plan for any particular race, and reviews it hundreds of times before the flag goes down to start the race. He knows exactly where his groove is and
what line of attack will result in fewer miles traveled over the distance of the race. In essence, he travels in as straight a line as possible.
Dale also knows that the probability of accomplishing his plan without any problems are low. At some point in the race someone will wreck, spin out or something will happen to alter his plan -- necessitate a detour. However, he will go back to the plan the moment the obstacle has been removed. You must operate in a way very similar to Dale Earnhardt.
The fewer maneuvers or zig zags you make will result in higher profitability. Earnhardt goes over his
game plan numerous times before the race begins. You too must begin with a game plan. Earnhardt optimizes the variables he has to deal with. Some of the variables you must deal with include market, sector and individual stock risk. Optimize your variables. If the Semiconductor sector is at 66% in Bear Alert status and the Computer sector is in Bull Alert status at 38%, you optimize the variables by choosing to invest in the computer sector. There are thousands of stocks to choose from. Optimize your variables and pick those which are fundamentally and technically sound. Investing will bring detours wrecks, and spin-outs such as stop loss points hit but that's life on Wall Street. Success comes from getting back on that plan as quickly as possible thus traveling a straighter line. If you don't have a plan its impossible to get back on track because you have no track. When I think back to my days of production, it was like being in a bumper car race at the carnival. Not because I had some love of crashing into the other cars in the arena, I just didn't have a plan. I wandered aimlessly.
I saw to it that the production came, but the account base never increased as I was constantly replacing clients who had given up on the bumper car rides. You know the old saying, if I knew then what I know now.....
Are you driving bumper cars? If you are, give it up and come over to the Talladega 500. Tom Dorsey. |
