The truth is you don't have to take big risks to make a lot of money in the market. You only have to know what you're doingâ€¦ Otherwise you'll learn some painful and hideously expensive lessons.
I just narrowly avoided one of the most embarrassing incidents of my life. And while it had little to do with investing per se, it reminded me how I lost — and then made — a fortune in the stock market. My experience could save you tens of thousands of dollars, not to mention a boatload of pain and anguish.
Here’s what happened…
About a year ago, a friend of mine in London, an internationally acclaimed concert pianist and recording artist, told me he was scouting for the perfect place to film a solo recital for DVD release.
I asked what kind of venue he was looking for. He said he wanted something small, intimate, beautiful, and historically significant, with superb acoustics. I immediately volunteered that I knew just the place, the American Shakespeare Center in Staunton, Va., a 300-seat re-creation of Shakespeare’s original Blackfriars playhouse and the home of several well-received chamber concerts.
He’d never heard of it but looked into it and eventually agreed. I booked the theatre. He got busy lining up the Steinway concert grand, a videographer, and a sound engineer. All that was left was to fill the seats.
Getting an audience would be no problem. After all, my buddy is a superbly talented pianist who has performed to great acclaim around the world both in solo recitals and with many leading symphony orchestras. Piece of cake. Or so I thought.
The theater director suggested I speak with the head of the Heifetz International Music Institute at nearby Mary Baldwin College. He could help me get the word out. But to say he wasn’t interested would be an understatement. Our conversation was strained, awkward, even. He didn’t respond to a follow-up email.
Meanwhile, my friends in the area — the same ones who never pass on an invitation to a basketball game or rock show — demonstrated the kind of enthusiasm for the event that I might have shown if I’d been invited to a tractor pull. Great art, I learned, isn’t for everyone.
Suddenly, it dawned on me: I know absolutely zilch about promoting a classical concert. This was an intimate theater in a small rural town. If it were half-empty (or worse), my friend would take a whopping loss. Even if I acted as a financial backstop — since it was my idea — a DVD of a recital in a near-empty theatre would be unusable.
I kept checking on ticket sales — and heard that essentially there weren’t any. I didn’t just start to worry. I began losing sleep. With only weeks to go before the performance, this was beginning to look like a slow-motion car crash.
Then I met Jason, God bless him. Jason, a local musician and teacher, loves classical music and helps run the annual Staunton Music Festival. He has a file of thousands of local patrons. He sent them emails encouraging them to attend and postcards with all the details. He printed posters and placed them all over town, arranged advertising swaps with local radio stations and, in short, filled the theater.
The recital ended up being both a sell-out and a rousing success. At the VIP reception afterwards, several attendees told me it was one of the premier musical events of their lives. And the DVD — shot in high definition and Super Audio — is “in the can” awaiting future release.
What does this story have to do with investing? Everything, in my book. As I look back, almost every bone-headed investment move I’ve made my whole life came down to a single overriding factor: overconfidence.
I know nothing about promoting a classical music event, just as I once knew next to nothing about short-term, out-of-the-money put and call options — and threw good money after bad. I knew very little about the penny stocks I lost money in too. (I merely bought somebody else’s really good story.) I knew nothing about market timing when I tried and failed to jump in for market rallies and out for the corrections. I knew little about the fixed-income funds I bought where the expenses ate up most of my return, not to mention the leveraged ones that collapse in a bond market sell-off. I bought companies that I didn’t know much about in industries I didn’t understand. In short, as a young man I assumed that making money was a lot easier than it is.
I learned some great lessons, but they were painful and hideously expensive.
I’ve since taken 28 years of investment knowledge — much of it learned the hard way — to The Oxford Club, helping ordinary investors navigate the world’s treacherous but lucrative financial markets. And we’ve had more than a modicum of success. The independent Hulbert Financial Digest has ranked Investment U among the handful of top investment letters in the nation for over a decade now.
The truth is you don’t have to take big risks to make a lot of money in the market. You only have to know what you’re doing … or trust someone else who does. That’s how you succeed in the market — and in promoting classical concerts, too.