"I made my fortune by selling too early"

Baron Rothschild once said, "I made my fortune by selling too early." What did he mean by that?

Some "investors" think they can buy an investment as it bottoms and then sell right before it tops. I call such "investors," speculators. There is too much speculative movement in price to precisely time tops and bottoms.

But, because so many speculators pursue this ideal, they tend to laugh at those who sell too early. Hence, Rothschild's quote is in response to them.

Investors like Rothschild spend time figuring out what an investment is worth. Only then do they try to buy low and sell high. With the reference point of worth, or value, they can try to buy things below value and sell them above value. Not surprisingly, speculative stock movements lead them to buy before a stock bottoms and sell before it tops. In buying investments below value and selling them above value, though, they make fortunes over the fullness of time.

In other words, Rothschild has the last laugh. Speculators make fun of him for selling too early. But, his ability to sell too early is the reason why he keeps his gains, while the speculators end up holding investments on the way down. Using the rational reference of value, Rothschild buys low and sells high (and too early in most cases), while speculators frequently buy high and sell low trying to time tops and bottoms.

Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.