A New Approach: Shark Investing
Few creatures have survived as long or as well as the shark. The shark, unlike his dinosaur cousins, continues to flourish. The reason is simple. The shark possesses a number of unique physiological and behavioral characteristics that keep it from danger and make it a highly efficient eating machine.
Sharks are cunning and aggressive. They rush in and feast on a good meal whenever they come across an opportunity. When conditions are right, they don’t hesitate to gorge themselves in a feeding frenzy. They don’t ponder theoretical matters and the state of the world. If there is something good to eat, they go after it and eat it.
Despite their aggressiveness and ferocity, sharks quickly swim away when circumstances change. They don’t dawdle once they have their fill. They move on and start the hunt for the next opportunity. They are in constant motion, hunting, eating, swimming away, and then hunting some more. They are one of the most efficient hunters and survivors that have ever existed, and they are the perfect model for the individual investor who seeks to conquer the investment seas.
Investors have been led to believe that the best way to approach the market is to become a part of the vast school of other investors who, like tunas in the ocean, seek safety in the midst of thousands of other like-minded tunas. They are passive and have no real control over what happens to them. Their primary goal is to survive by following the crowd. Their passivity may keep them safe if they are lucky, but they are rewarded with unspectacular results and often end up as someone else’s meal.
Shark Investing is about taking control of your investments. It is about being active and not passive. Sharks stalk their prey, move aggressively, and stay flexible but run when danger lurks. Sharks have no qualms about moving on to the next opportunity at the first sign of danger. They know that even the best situations will eventually become dangerous if they stay in one place too long.
One of the key benefits of Shark Investing is that it not only helps improve returns, but it also decreases the risk of loss. You minimize risk by learning to sell quickly and decisively, which is the investment equivalent of swimming away. If you are sitting in an unproductive investment, you dump it and move on. Selling is one of the most underrated and unappreciated tactical tools on Wall Street. Traditional Wall Street doesn’t want you to sell. It will constantly find ways to talk you out of running for the safety and security of cold, hard cash.
To earn your fins as an Investing Shark, you have to be ready to reconsider much of what you think and believe about investing. Shark Investing is about harnessing your power as a fast-moving individual. One of the first things you will learn is contrary to popular market wisdom and just about everything you’ve ever read on the subject. Active investing, in which you stay in motion, is a far safer approach to the stock market than the long-term “buy-and-hold” approach that Wall Street promotes. (See Chapter 4, “Why Long-Term Buy-and-Hold Investing Is Far Riskier Than Shark Investing.”)