5 investing principles to keep in mind, no matter what happens next

Good morning! 👋

There’s not a lot in the headlines that we haven’t talked about already in great detail. So I thought we’d take a moment to switch things up a bit today.

Investing doesn’t have to be complicated. In fact, you don’t need anything more than a few key principles.

That’s hard for many people to fathom, and I get why they’d feel that way. We live in an information-addled world dominated by a click-driven, 24x7 sensationalist-motivated news cycle where the pressure to be connected is intense.

The temptation is to focus on the minutiae.

Learning to “zoom out” is far more critical.

Most investors fail, despite having the best intentions, for one simple reason... because they lack the long-term perspective needed to navigate short-term market disruptions.

Learning to build a framework of your own can make all the difference.

I know.

It did for me.

Years ago, I was a newbie investor trying to make sense of the markets. Like many people in the early ‘80s, I found it hard to come to grips with the collapse of the Soviet Union, runaway inflation, a recession, oil deregulation, etc. when it came to my money.

The devastating headlines led some very smart people to conclude that the economic woes were insurmountable, and investing was not worth the risk.

My grandmother, Virginia “Mimi” Gruner, didn’t see things that way.

A self-taught investor, widowed at a young age and left with a tiny life insurance settlement, she was making thousands of dollars a month at a time when that was inconceivable, and her portfolio was doing exceptionally well.

I asked Mimi how she was doing that. What was she buying?

She told me, and my understanding of how markets worked changed overnight.

What did Mimi say?

Was it about which companies to buy? Cutting risk? Finding undiscovered stocks?

No.

Psychology.

Looking across the dining room table, Mimi simply said, “People want to believe the world is going to hell in a handbasket.”

That was a major “A-ha!” moment for me.

Suddenly, I understood why most investors can’t buy low and sell high, why they try to time the markets (even though that almost never works), and why they can’t remove emotion from the equation, which is the single biggest thing standing between them and the profits they crave.

I also understood how to find the biggest, most profitable opportunities where others saw only chaos.

Granted, it’s easier to believe pessimists. Especially in this day and age, being optimistic feels almost reckless.

When it comes to your money, a bearish view just sounds, well... smarter.

The unspoken message is that pessimists have dug deeper and developed a nuanced view of what’s around the corner. Much like conspiracy theorists, they’ve got an explanation for everything, even if it’s half-baked.

But here’s the kicker: The data shows beyond any shadow of a doubt that staying the course is the far more profitable course of action.

Here are 5 simple principles that can help you up your game immediately.

1. Capital is a creative force and the foundation of wealth

It is constantly growing—and has been since the dawn of time. Sometimes growth slows, but it has never, ever stopped. What’s more, barring something unpleasant—like the end of humanity—it probably never will.

2. The markets have an upward bias over time

Many people find this hard to believe because they are focused on moments in time, but true investing success comes from learning how to focus on what happens over time.

Yes, the markets go up and down. But that doesn’t change the fact that the general direction is UP as a function of ever-larger amounts of money chasing fewer quality stocks. The only question is how you handle the swings, a process I call “buy and manage,” which is very different from “buy and hope”... err, hold.

3. Technology increases total market size every time, in every industry

Many pessimists base their argument on extrapolation. For example, they assume the markets will go to zero because of what happened at the turn of the century and the Internet Bubble burst, or 2009 when the bottom fell out, or COVID hit.

In all three cases, millions of investors believed the end of the financial universe was upon us, but that’s a lot like saying we’ll have 18 feet of snow on the ground in July based on three inches falling in November... and about as accurate.

Technology is the ONE constant capable of increasing market size everywhere it occurs. That means a constantly expanding stream of ideas that translate into earnings and, in turn, higher stock prices over time.

4. Profits follow innovation

Pessimists take doom and gloom personally and view it as a form of ultimatum because they want to be right.

Optimists view doom and gloom as an opportunity to try something different because they want to be profitable. Anything negative is only temporary; keep in mind that innovation has never failed to produce profits. Ever.

5. Disruption crosses all economic strata

Pessimists want everybody to fail whereas optimists want even pessimists to succeed. That’s why disruption—and disruptive technology, in particular—is so powerful and able to overcome even the worst pessimism. Especially now that AI is on the loose.

The Bottom Line

Let’s finish with a simple, hard truth.

The world we live in today isn’t the one we used to live in; the relentless news cycle has hardened our outlook and, in the process, probably made all of us more skeptical than we’d like to admit.

Learning to flip that around can be a source of tremendous strength—both in life and in the financial markets.

I’ll be with you every step of the way.

Now and as always, MAKE it a great day!

Keith 😊