What is the SINGLE BIGGEST FACTOR for investing success… in BOTH the stock market and in real estate?  I’m Bryan Ellis.  I’ll tell you right now in Episode 124.

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Hello, SDI Nation!  Welcome to the podcast of record for savvy self-directed investors like you!

Another crazy day on Wall Street yesterday, with the Dow Jones Industrial Average dropping another nearly 500 points.  Oh, what?  You didn’t hear about that one?  These rather massive swings have really become the norm, haven’t they?

I have a question for you:  Do you think that’s the sign of a healthy market?  Seriously, do you?  Neither do I.

And, by extension, it’s not a healthy environment for your capital.

So, a couple of days ago, I offered a free copy of my upcoming new book to the first 100 of you who asked for it.  And WOW, did you folks ever respond.  All 100 copies were snapped up on the first day.

But here’s the reason I bring that up:  I’m finishing up the last bit of work on that book, when it occurred to me that I have the PERFECT way to explain to you the single biggest factor for investing success in stocks and in real estate… really, in any asset class where your success is a function of appreciation.

What is that factor?

I’ll explain it to you with a story.

My wife and daughters love to go tubing.  That’s where you sit in large inner tube and float down a river.  Yep, that’s it.  The way it works is you go to a little business that rents tubes where you pay your money, they lend you a tube, then they drive you up river a couple miles and drop you off.  You get in the water, and the river carries you back down to the starting point.

It’s just a really fun, relaxing way to hang out together.  Just perfect for laughing and goofing off and just being together.  We’ve only done it 2 or 3 times, but it’s something we really enjoy.

So, recently, the 4 of us went tubing down the Chattahoochee River in North Georgia.  Just like normal, we paid our money to the guy at the tubing company and engaged in some friendly banter.  Somewhere along the way, he rather casually mentioned that the water level was a little low, but that we’d be just fine, and that there were a lot of people out there today having fun.  And truth be told, we were eager to join them.

So we hop on the van that takes us to the entry point, and we jump into our tubes.

And within minutes after getting in the water, I get stuck on a small rock outcropping.  It’s no big deal… I’m a pretty big guy, and my wife and daughters are still floating merrily down the river, so no problem.  Besides, this time they gave me a handy staff to use to push myself off in case I needed to do so.

At this point, I caught a small current that helped me go forward a bit… but most of the time, I kept hearing a “scraping noise” that I couldn’t quite make out.

I also noticed that a few people here and there had gotten out of the water and were sitting with their tubes along the riverbank.  Not many, but usually, nobody does that.

A moment later I’m stuck on another rock, and then another.

I’m still moving forward, because I’ve got the stick to push off with, and I’m hearing the scraping noise more and more.

Then, I just stop.  I’m not stuck on a rock, and there’s water around me, but I’m not moving at all anymore.

Well, it turns out that the river isn’t just a little low… it’s DESPERATELY low.  There’s literally so little water flowing that my inner tube is stuck against the riverbed.  And while there’s water in the river… there’s not much, and there’s just not enough to push me forward.

And do you know what?  No matter how much I wanted it to be different, the BEST I could hope for was the occasional forward momentum in the specific parts of the river where the water was a bit deeper… and even that momentum would, necessarily, be short lived.

Bottom line?  I had to get out of the river.  I wanted it to work, but it just DIDN’T… and before I finally got the message and stopped trying to force something that wasn’t going to happen, there was a WHOLE LOT of frustration for me along the way.  And a bunch of bumps and bruises, as I had to get out of the tube several times to actually pull it forward over the shallow water, but managed to stumble and fall because, even though the water was too shallow to carry me forward, it was still deep enough to cover rocks that tripped me up.

My friends, I really enjoy tubing.  But as I discovered, I HATE tubing when the water level is low.

What’s this mean for you?  Well, there’s ONE THING that matter more than any other factor when it comes to making money from real estate or stocks, and it’s kind of like the water in that river.

What is it?  It’s the MARKET itself.  It’s the activity of the other people in the world who are interested in the thing you’re investing in… and the psychology under which they, as a group, are operating.

The “Market” is really nothing more than the way people are behaving who are making investments similar to yours.

So in stocks, if you’re buying Google, you probably are also paying attention to what’s going on with Facebook and Netflix and Amazon… they’re all tech stocks, a clear market sector.  Because it’s very rare for ONE stock to have a strong run without other similar stocks also having a strong run.

Same thing in real estate. If you’re buying real estate in Atlanta or Boston, the thing that’s going to make the most difference to whether that real estate increases in value is how much activity there is from OTHER investors in Atlanta or Boston… but what’s going on in Dallas or Los Angeles don’t matter as much, because they are entirely different markets.

My friends, mark my words:  It’s almost impossible to buy real estate that will go up in value if that property is in a stagnant or declining market.  And, thankfully, the converse is true, too:  It’s actually pretty hard to lose money on real estate if you’re buying into a market that’s fundamentally healthy and on uptrending.

What’s the lesson for you?  Don’t buy properties, buy markets. 

And you know what?  When those markets run dry, get out.  Buy-and-hold-forever is a fool’s game.  Why?  Sometimes, markets flow like raging rapids, and sometimes they’re dry.  And there are ALWAYS hints in advance of what’s to come.

I’ll spend more time on this in future episodes, because I suspect there’s a real appetite out there for knowing which markets look best and which look poised to fall apart.  Want to know more?  Then there are 2 things you MUST do:

First, be sure that you’re subscribed to this show through iTunes or Stitcher.  It’s important that you do so… and it costs you nothing to make sure you don’t miss this information.

Second, even more importantly, make sure you’re on the Self Directed Investor private discussion group.  Just text the word SDIGROUP to 33444 to join at no cost.  Again, text the word SDIGROUP with no spaces or periods to 33444.

Which markets are best?  Which have the right amount of water to push your portfolio profitably down the river and on to predictable profitability?

Join me again for the next episode of Self Directed Investor Radio, my friends, and I’ll tell you more.

In the mean time:  Invest WISELY today, and live well forever!

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