10 Investing Tips From Heavy Metal

By Stephen D. Simpson, CFA | July 26, 2010 AAA
10 Investing Tips From Heavy Metal

Do you love pyrotechnics, seemingly unlimited lung capacity and amplifiers that go to 11? If so, you may also find that beneath the long hair and studded leather, there is sage investment advice within heavy metal.
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10. "Master of Puppets" Metallica (1986)
"Master of puppets, I'm pulling your strings
Twisting your mind and smashing your dreams."

Lesson: Think for Yourself
Ultimately, you are the one who will profit or lose by your decisions. Make sure then that your investment decisions come from a well-reasoned, rational place and not emotion or superficial analysis. It is easy to be swept up in the currents and eddies of the market, but once you give into the group-think, you are truly vulnerable.

9. "Be Quick Or Be Dead" Iron Maiden (1992)
"You've got to watch them - be quick or be dead."

Lesson: Move Quickly on Good Ideas
Odds are, if you manage to find a truly undervalued company out there, others are on the scent as well. If you wait too long, others are going to bid up the stock and suddenly that undervalued stock is fairly valued… and you have to cope with the specter of being right, but making no money from it. I am not suggesting that you curtail proper due diligence; rather, I am simply pointing out that you can never know everything about an investment and paralysis-by-analysis can cost you real money.

8. "The Ripper" Judas Priest (1976)
"When you least expect me
And you turn your back
I'll
attack."

Lesson: Avoid Trouble
Most people would not walk into a blind alley by themselves at night. Odds say that you will be fine, but you never quite know who or what may be waiting for you. Likewise, do not invite trouble into your portfolio. Keep up on the news and financial performance of your holdings. Review your thesis and make sure your positions still make sense. And do not dabble in the pink sheets and penny stocks; if the Ripper were to stalk investors, that is where he would do it.


7. "All the Fools Sailed Away" Dio (1987)
"It's your one great chance for a miracle
Or we will disappear never to be seen again."

Lesson: Beware of Advice
I know there is a certain irony in advising you to be cautious about advice. But here I mean something more like fanciful predictions or know-it-all advisors. Remember those predictions of Dow 36,000 back during the tech bubble? Have you seen the current ads suggesting gold is going to $3,000 or $4,000 an ounce? If somebody is promising you a miracle, they are full of it, and they are trying to reach into your pocket. (Learn more in 5 Ways To Spot The Next Stock Bubble - And Avoid It.)


6. "Ace of Spades" Motörhead (1980)
"If you like to gamble, I tell you I'm your man
You win some, lose some, it's all the same to me."

Lesson: Do Not Gamble
What is the difference between investing and gambling? A rational person expects to make a fair return on an investment, whereas the expected return on a gamble is less than zero. Gambling can be fun, whether you go to a casino or whether you decide to just take a flyer on a biotech stock. But do not base your entire investment philosophy on trying to hit 10,000-to-1 longshots, or you will quickly end up with nothing but losses.

5. "Safe Home" Anthrax (2003)
"You have always been my safe home!
I walk! I run! I burn out into you!"

Lesson: Have a Core
Every investor needs a strong core, whether that is a core group of quality stocks that you are holding for long-term gains, or a core philosophy that guides you in your day-to-day investment decisions. If you try to constantly hold the "hot hand" of stocks, you will find that your trading costs eat up your gains. Likewise, if you constantly change your investment philosophy with the next book or newsletter you read, you will never be comfortable and well-practiced enough to successfully implement a strategy.

4. "Reckoning" Killswitch Engage (2009)
"Enjoy this while it lasts
It won't be long before it dies."

Lesson: Cycles Do Not Last - Take a page out of Sun Tzu, and when the markets are very strong, start thinking about how to protect your gains. Likewise, when the markets have been awful, start developing your strategy to get back into quality undervalued ideas. Whatever is going on in the market today, it will pass and it will pass more quickly than you probably think. Also, remember that no stock always goes up, so if you have a huge winner, consider protecting that gain. (For more, check out Market Cycles: The Key To Maximum Returns.)

3. "Don't Go Away Mad (Just Go Away)" Mötley Crüe (1989)
"Seasons must change
Separate paths, separate ways."

Lesson: Do Not Hang On to Losers
Selling at a loss is psychologically painful; it is a tacit admission that you were mistaken. Still, it is better to acknowledge a mistake, clean up the aftermath and move on. Tying your assets into losing propositions is not only mentally stressful, but it keeps you from maximizing your investment opportunities and maybe even making some of that money back in better stocks.

2. "I Love it Loud" KISS (1982)
"Stand up, you don't have to be afraid."

Lesson: Do Not Let the Market Intimidate You
Investing is something than almost anybody can do if they are willing to put in the time and effort. Do not let advisors tell you that it is too hard or too complicated, and do not tolerate anybody waiving off one of your questions with words to the effect of "it is complicated, you would not understand."

1. "Paranoid" Black Sabbath (1970)
"All day long I think of things
But nothing seems to satisfy
Think I'll lose my mind
If I don't find something to pacify."

Lesson: Go Out and Play
I love the markets; I sincerely do. But even I will push away the laptop and go take a walk around the lake or read a book. If you do nothing but follow the markets, it will either drive you mad or turn you into someone your friends and family probably do not want to know. Investing takes a lot of time, energy, and focus - you must step away now and then to recharge the batteries and live a life beyond spreadsheets and charts. (For more, check out Due Diligence In 10 Easy Steps.)

Inspired by the CFA Institute article: Top 10 Investment Tips From Classic Rock by Tom Collimore, CFA.

Catch up on your financial news; read Water Cooler Finance: Goldman Fined, Financial Fixes And Apple's "Apology".

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