Are Investment Ideas Useful?

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The sceptics are here in force. And we don’t mean the speakers lined up to give their take on the world ‘After America’ as the symposium is called. No, we mean the listeners – or delegates as their name badges call them.

They want their money’s worth in investment ideas, recommendations and intrigue. But how much are the ideas really worth?

Dan Denning is first up this morning. His ideas have been rather profitable for subscribers of Australian Wealth Gameplan of late. Perhaps it has something to do with his investment philosophy – ‘only pick stocks that go up’. You should try it sometime. But is that the measure of an idea? Its profitability?

What about an investment idea that helps you avoid a loss? That could be just as good as a profitable investment idea. In fact, avoiding a loss is even better than making a profit if you believe the experiments done on human psychology, which supposedly prove it. Economists think we’re irrational for fearing losses more than craving gains. And then blame the financial crisis on greed in the same breath…

Greg Canavan editor of Sound Money. Sound Investments has been warning his subscribers of a big loss in the making. His investment style is to value companies based on their characteristics and then find out if the market price is above or below what he reckons the stock is worth. It sounds straightforward until you delve into the moving parts, like credit bubbles and dodgy accounting tricks. Greg’s on top of both.

Another way of valuing an investment idea might be how well it helps you preserve wealth – no losses or gains to worry about. After all, having wealth at a time like this is a burden if you care about keeping it. We’ve got a mystery presenter to speak about gold as a wealth preservation idea. At least that’s what we think he will be speaking about.

But the best way to value an investment idea is of course how useful it is to you. Some of our delegates are hoping to make enormous gains. Some of them want to avoid losses as the world economy continues to crumble. And some of them want to stop worrying altogether.

There is one investment idea in which everyone can find value. Because it provides capital gains, but you don’t have to worry about them actually appearing. In fact, a short-term and unrealised capital loss would actually improve this idea’s prospects for investors. And the investment idea provides the income you need to fund a worry-free retirement. At least, comparatively worry free anyway. We’ll be speaking about it at 3:40 pm today. Hopefully the sceptics will be convinced.

Nickolai Hubble
for The Daily Reckoning Australia

Nick Hubble
Nick Hubble is a feature editor of The Daily Reckoning and editor of The Money for Life Letter. Having gained degrees in Finance, Economics and Law from the prestigious Bond University, Nick completed an internship at probably the most famous investment bank in the world, where he discovered what the financial world was really like. He then brought his youthful enthusiasm and energy to Port Phillip Publishing, where, instead of telling everyone about The Daily Reckoning, he started writing for it. To follow Nick's financial world view more closely you can you can subscribe to The Daily Reckoning for free here. If you’re already a Daily Reckoning subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Daily Reckoning emails.
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