Kenny Rogers Talks Stocks

People often ask who my biggest inspiration is in life. It’s a tough question as I can pin point several moments in my life which have forced a change in perspective and direction. But when pushed I come back to the same person. Kenny Rogers. The man’s song, The Gambler epitomises my philosophy on life, and more relevant to this article, stocks.

“You got to know when to hold em”

These are the struggling stocks, you look at your total gain but all you see is red text and a little minus sign. But what sets these apart from some of the other red stocks is the potential. Over the past few months we have seen a lot of red, market crashes. But it’s important to look at the long term trend of the stock. It takes courage. Just remember if parents can muster up the courage to call their children “Charity” and “Tiger” you can find some courage to hold your stocks.

Right now we see the big four banks down in the dumps, but the upside remains. Billion dollar profits and an oligopoly, don’t panic, unless you have a mortgage.

“Know when to fold em”

This is the tough call. The sort of stress that children (probably called Tiger) experience when picking the treat they successfully negotiated through the mid aisle tantrum. These are your declining, doomed forever stocks. Right now we are looking at the resource sector wondering if it’s ever going to recover. Some would argue that even a ‘recovery’ won’t see a return to the glory days that built the high prices like BHPs $40+ in 2011 or RIO’s $115 back in 2008.

I am reluctant to have too much exposure to these sleeping giants, in fear that they may never wake up.

“Know when to walk away”

Perhaps a stretch, but this line is about that near sell moment we all reach. Our stock has out performed our short term expectations and we go to pull the sale trigger. We’ve all been there, watching the football. Your key forward marks, turns and you get excited for the inevitable goal. But shock horror, he passes to a less skilled, often disliked player (probably called Tiger) slightly closer to goal on a completely different angle. Because you go for Melbourne the player fumbles, turnover and the other team manage to move the ball in seconds for a goal. Don’t relive that feeling, its awful.

Sometimes you just need to back yourself, or really your stock. Take a few deep breaths, imagine the bulk gains and walk away. This is especially important for those speculative small capital investments where the early gains are good, but the long term gains are great!

“Know when to run”

The charging bull is reaching the peak. The stock has sky rocketed up for no other reason than irrational excitement. Think early adopted tech or the idealistic marijuana manufacturers. This is when the Tigers of the world capitalise. He threw a tantrum, it was a long shot but the parents caved and offer the treat. Tiger must take the treat in the moment, don’t get too greedy.

These are pretty rare and often you don’t realise it until it’s too late. But next time your stock soars, check to make sure it’s not based purely on unfounded speculation and excitement.

“You never count your money, when your sitting at the table, there’ll be time enough for counting, when the dealings done”

This kind of sums the song and message up. Don’t constantly check your balance or fixate on the gains/losses in the short term. Find some confidence in a long term trend, focus on your investment strategy and review at pre-set checkpoints.

While the Tigers of the world flip flop, panic and make rash decisions, have the patience to play the long game. The average returns in the stock market speak for themselves.