“Most of the time, it is unwise to invest in the future.”
It may sound contradictory to the “conventional wisdom”—and it is—but Mark just shared what may be the most insightful investment rule you’ll ever hear…
From Mark Ford, editor, Creating Wealth: I learned the entrepreneurial part of this lesson—don’t invest in the future—about 20 years ago while working with about a dozen publishing companies. I asked them to present yearly business plans with projected sales and profits. I thought it was a good exercise in getting them to think about how they could grow their businesses.
I discovered that the projections were always grossly overstated. And when I looked into it, I realized they were overstated because the revenue figures corresponded to the product lines they were planning, half of which never materialized.
So, I made a change in the way I asked for the information. I made it clear that I wanted projections, not goals.
I told them I wanted to see how the next year would look if everything continued just as it was. And I didn’t want to see anticipated increases in anything unless there was proof that those new numbers were already coming in.
This did two good things. We got to see what was likely to happen, not what might happen if all went well. It also motivated our publishers to work even harder to innovate and improve. The result was dependable projections and steady growth.
After working with Tom and the Palm Beach Research Group, I began to think about how ordinary investors make financial decisions about stocks.
I could see that the most common practice was to buy into stories about the future, rather than to examine what is going on today.
And I knew, based on my experience as an entrepreneur, that this was a big, big mistake.
So, as a stock investor and a wealth builder, I am not interested in putting money into a company that is “on the verge” of discovering a mother lode of some commodity or “about to announce” a strategic merger or “about to sign a deal” with a major contractor.