The past week has been a rollercoaster ride for investors.
It seems that each day brings with it a completely new perspective. One day you’re hearing how good things are, the next disaster is imminent.
On Monday you hear talk about hope and calamity averted, but on Thursday we hear about renewed troubles and inflation posing a serious risk.
I just had to laugh.
It seems that most of the people in-the-know don’t know what’s going on.
In many ways it feels like 2008 all over again.
Nearly everyone was taken by surprise by the demise of Lehman Brothers – $691 billion one day, broke the next.
What I’ve found is that when it comes to studying investing, you have to learn two things:
- Manage your emotions
- How to read numbers
Keeping our emotions in check takes practice. Especially when it comes to money, emotions tend to run high.
But the truly successful investors I know have a vision. They understand the risks involved and realize there’s no such things as a guaranteed home run. They also never invest more than they are willing to lose – one of the most common reasons people have trouble controlling their emotions.
Now when I see the stock market go down, I see it as an opportunity to ADD to my portfolio, not sell at a loss.
While emotions aren’t as easy to master – numbers are simple, clear.
I realize that many people aren’t interested in learning how to read numbers because it’s boring, the language a drag and can be quite time consuming, BUT anyone serious about using investments to grow their fortune, in my opinion, must take the time to study numbers.
Just the other day I came across an article with numerous statistics that describe the situation that America finds itself today, so I thought it might be interesting to take a look at them and understand just what they mean.
- 9.1% – Today’s unemployment rate. The highest it has been since 1982.
- 40 months – The average duration of unemployment.
- 131.2 million – Total number of jobs held by Americans in August.
- 25.4% – Percent of teenagers that are unemployed.
- 14.5% – Percent of people on food stamps.
- 9.6% – Percent of people who say college isn’t worth the investment.
- 11.5 million – Few job holders than there were in 2007.
- $24,000 – Average student debt upon graduation.
Some telling numbers in and of themselves, but let’s take a closer look at what a few of these really mean.
Take today’s unemployment rate of 9.1%. This is determined by the Labor Department. However, the formula they use has changed over the years. Why? In order to influence people’s perception of the situation. The more manageable the number, the more the public can stomach it.
John Williams, creator of Shadowstats, exposes the flaws in doing this and at present has stated that the unemployment rate is closer to 22%. YIKES!!
Another telling number is that of the number of jobs held by Americans – 131.2 million. Compare this to January 2000 when the number stood at 130.8 million. In just over a decade less than 400,000 jobs have been added and yet, at the same time, the eligible work-age population has grown by 28 million. YIKES again!
The point is this. Numbers and especially statistics can be very convincing. People can’t quantify words such as “many” or “a lot,” numbers allow us to get a clearer picture of what is going on. They also allow us to make comparisons.
What I learned from my studies in psychology is that statistics can be adjusted to create pretty much any image the creator desires.
So why do I talk about this here?
Because business and financial success require us to understand numbers. A true investor will be able to tell you whether a stock, a piece of property, or a business is a good investment simply by looking at the numbers.
Numbers tell us a story. Unfortunately, sometimes we need to dig a little deeper than the numbers people give us.
Do your own research and you give yourself a better chance at winning.