The Virtues of the Humble Investor

Written by Jeff Nielson
Wednesday, 14 March 2012 14:06

Ironically, there are few if any virtues in our society which are as under-appreciated/under-respected as humility. Living in a me-first world which worships the “Alpha wolf”, who aggressively takes what he wants in life; humility is mistakenly confused for weakness or timidity.

Yet being humble in no way implies being meek. One can be humble while still refusing to be anyone’s doormat. In fact all that is implied by humility is the opposite of arrogance. The arrogant individual is prone to being impulsive, over-confident, and careless (if not reckless). The humble person is none of these things, instead leaning towards prudence and caution.

While so much of what is taking place today in the global economy is confusing (and frightening) to the ordinary person, what is utterly unequivocal is that people need to be completely focused upon prudence and caution when handling their financial affairs. We have already seen once (in the Crash of ’08) what happens to the arrogant; and as many commentators (including myself) are warning people, 2008 was nothing but a warm-up for the economic chaos which lies ahead.

Clearly it is the Humble Investor whom people should be placing upon a pedestal as their role-models to emulate, were it not for the fact that their humility prevents these individuals from accepting such a position in the spotlight. And it is “humble” investment strategies which investors should embrace today, as opposed to the world of high-frequency trading, exotic financial products, and endless acts of paper-fraud – epitomized by the ultra-arrogant bankers of Wall Street.

Understand that with the most rigged, corrupt markets in history, with unprecedented volatility, and with entire governments literally declaring bankruptcy; now more than any time in our lives (no matter how old we are) we must be “playing defense” with our investing. It is important to note this explicitly, because of what playing defense implies.

When we are in a defensive mode as investors, the primary objective of any/every investor is preservation of capital. Period. I completely understand that because of the gross economic mismanagement of our corrupt, incompetent governments that many people feel they need to focus (first) on maximizing return. That is the path to financial suicide. It was the people who were looking to “maximize return” who were especially devastated in 2008, and it those people who are certain to be wiped-out (again) in the years ahead.

Fortunately, we can demonstrate with both logic and empirical evidence that not only should the Humble Investor outperform his more arrogant rivals, the Humble Investor does outperform all other investors in our markets.

Recalling our definitions, as Humble Investors we should be seeking investment options which reflect prudence and caution, and with the ultimate objective of preserving our capital. For nearly 5,000 years, no asset class has come remotely close to preserving wealth (i.e. capital) as perfectly as gold and silver. One cannot get any more prudent or cautious than that.

What have we in fact seen in our markets over the past decade? Precious metals has been (by far) the best-performing class of assets. Humble Investor: 1; Everyone Else: 0.

However, advising people what to do to become Humble Investors is obviously only half the battle. Equally daunting to the ordinary person (especially in a world of manipulated markets) is how to become a Humble Investor – i.e. how do people accumulate holdings in gold and/or silver in a prudent and cautious manner?

As a commentator, I have simply abandoned attempts at forecasting gold and silver prices. It is literally nothing but a pointless exercise in guesswork. Over the long term, as I regularly remind readers our most likely fate is extreme inflation and/or hyperinflation across most of the Western world – making “prices” nothing but nominal/arbitrary fantasy-figures.

Short-term forecasting has become an even greater exercise in absurdity. With fundamentals totally out of the window, we are left with nothing but the hocus-pocus of “technical analysis” – an exercise which by definition has zero mathematical validity in manipulated markets.

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