By tamas @ Adobestock.com
You know America’s pastime isn’t baseball. It’s real estate and stocks.
You probably have a good idea about house prices in your neck of the woods, and anywhere else you’re interested in. But when it comes to your home, most of the time, you’re not hanging on to its Zillow price, for example, quarter to quarter.
That is unless you’re trying to sell your home and even more so if you’ve got a down payment to buy another contingent on it being sold. That puts a bit more pressure on you. You’re relying on the market to do something for you. And it doesn’t always work out. The same goes for investors.
Where investors get into trouble with stocks is when they need the market to do something for them. When they buy call options, for example, on a “sure thing” that expires out of the money. That’s pressure. Not only does this investor need to be right about how much the stock will go up, but also by when. And if it goes wrong, perhaps he’ll try to double down to “make it back.”
Investing with borrowed money is similar to buying a home with a mortgage. There’s always someone who wants their money back with interest. If the investment doesn’t work out as planned, then insolvency turns into margin calls where the brokerage sells the investor’s stocks indiscriminately to raise cash. Like a home foreclosure.
The problem with putting time in another party’s hands is they will separate you from your money at their prices. When you lose control of your money, you are at the whim of the other guy. No one likes working for the man, but when you’re relying on prices to help you “make it back,” that’s what’s happening.
Action Line: Keep control of your money. There are plenty of ways to separate you from it. Keep it simple. When you want to talk, I’m here.
Originally posted on Your Survival Guy.
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