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September 22, 2010

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That last example about patience is eye opening. $5k to $22 million in 52 years is pretty good! Granted, taking into account time value of money, that $5k was worth considerably more in today's dollars.

Still, it's an example of buy and hold, and taking a long term view. While many of us might not be here another 52 years, our kids will. Good justification for setting aside even a small sum money for them early on.

Most common mistake. Losing money. Losses will always hurt more than gains. A 20 percent loss followed by a 20 percent gain does not make you even.

Diversification is just a word to help investors sleep well at night, however it does not control losses. There are better ways to invest.

I agree with all of these.

I think lack of patience is the biggest problem. InvestoWorld is not a place where good strategies pay off quickly. If you don't give your good strategy time to pay off, it is not the fault of the strategy but of the person executing it. People often give up on a good strategy just before it pays off.

My tip for acquiring the needed patience is to only invest in things you understand well. That gives you confidence and confidence gives you patience. You are better to invest in two asset classes effectively than in ten asset classes ineffectively.

Rob

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