The James Dicks Blog

I don’t know about you but, so far, this year has been very busy for me. Dealing with the current state of the economy, politics, trying to understand the new paradigm of American commerce, more politics, the housing dilemma, stocks go up big…then go down big, more politics…well, you get the message. From the moment we wake up in the morning until the time we go to bed at night, there seems to be some kind of controversy going on and, frankly, it’s getting tiresome. We struggle daily to make more money so we can buy more things and many times it appears that our 20th Century pursuit for a life of personal happiness and material comfort has become a real chore for us in the 21st Century.

Traditionally, Americans have tried to attain what became known as the American Dream through hard work and cautiousness as it pertained to their personal finances. This approach helped our grandfathers develop a solid financial foundation that insured a comfortable life and a tranquil retirement. But in the past few decades those values have been pushed to the sidelines in favor of a “get it now” financial attitude tied to a “get rich quick” philosophy. Our population seems to be constantly searching for instant riches through state sponsored lotteries, game shows, pro sports, show business or litigation. Many psychologists actually believe that the idea of quick riches has served to deteriorate our traditional American work ethic.

A few decades ago, the vision of the American Dream was essentially universal. You attained it by earning and saving enough money for an education for yourself and your children, a home in the suburbs, a dependable car, through a first-rate job to sustain the dream. But today it’s different for each one of us – today the dream is how you personally define it. For many of you, trading is a method of attaining the dream but remember that trading is not a get rich quick scheme but rather a technique of adding to your personal wealth in a methodic manner.

Trading will allow you to adjust your personal prosperity at your own pace based exclusively on your own parameters – things like risk tolerance and your specific financial goals. But never doubt that you will have to work industriously and deliberately in order to excel in your trading. It takes some planning, some preparation and some education. It also takes a calculated work ethic to attain a positive end result. There is no “get rich quick” plan – it’s going to take some time and you have to be prepared to expend the energy necessary to attain a successful final outcome. A winning trading experience represents how Americans used to reach for the dream – with a determined and unwavering resolve while developing a sense of self-reliance and confidence in their plan.

Ideally, we might all feel more secure and content if we could go back in time and live a less complicated life but that’s not going to happen. It is time to develop a new principled strategy that will insure growth in the short-term and in the long-term.

Today, American society seems to be extremely focused on the intrinsic power of the almighty dollar and, many times, totally discount the joy we can find in our lives for reasons other than material gain. We should remember that while money is an important aspect of life, it certainly isn’t something that genuinely brings joy – you can have lots of money and be totally miserable. I believe it’s time for us all to redirect our attention and values to the things that are truly important in life in an effort to not just attain, but enjoy, our personal American Dreams.

Every year brings with it new challenges. The global economic situation I’m sure has thrown some new challenges at your investments, but as long as you take precautions prior to any calamitous events, your personal financial situation could remain balanced and relatively stable.
The trick is to prepare yourself and your investments for any future drastic market movements. Of course, it is impossible to exactly predict when or if the market will hit new highs or experience a sudden downturn. But if you create a personal financial plan in advance, you might be able to avoid making some basic mistakes, no matter which way the markets move.

The first is a plan I constantly preach, to set your goals, both short- and long-term objectives. Be extremely specific, write them down and post them someplace that will allow you to constantly see them, read them and study them. Follow the plan and try not to make emotional decisions.

Be prepared for anything. The chances of the markets going through a correction are very good. But you must also remember that the markets just might grow in value. Markets go up and down, and you need to be prepared for that. Some investors incorrectly believe they don’t need to do anything when the markets are strong and their portfolio is gaining in value.

Don’t forget to watch your asset allocation. Know what you are invested in and make sure that you examine where you money is invested a few times each year and determine whether or not it’s working for you. You can set a plan to rebalance every month or once a quarter, whatever makes you comfortable. Just don’t ignore your investments; keep your eye on the “ball.”

Make sure your plan also has diversification built in. I know you are sick and tired of me lecturing about that basic principle of investing, but I continue to hear stories from investors all over the country who keep getting burned because they don’t practice proper diversification. If just one segment of the market is providing all your gains, you could end up with an unbalanced portfolio that could possibly cost you in the long run.

Once you determine your investment style, institutionalize it to your personal trading method. When you find something that works for you, don’t let go of it. Try writing a journal to document your winning trades and, maybe even more important – your losing trades. Just like writing down your goals and ambitions, physically writing down the particulars about your winning and losing trades will burn the experiences into your mind permanently so you’ll know what to do, or what not to do, the next time.

The information available to us is almost infinite. Unlike other parts of the world, most of us in the United States have the Internet, libraries, book stores, magazines, workshops, college courses, television programs and radio shows that can teach us about the various strategies of investing. Find the plan that works best for you and make sure you feel comfortable with the manner in which you are involved in the investment community. If you need help, find an investment professional who can be a mentor and a guide. The more you learn, the better off you will become.

Happy Investing in 2010!