Imagine — what if you can prevent thousands of losses before you invest in the market. What if that is possible? What if you can avoid and significantly reduce your losses next time you invest in the market.
Recently, I came across a book which is about loss prevention. Often in life, we are stuck in the response mode. We put out fires. We cut our losses short. We are always in a state of emergency. But we never take the time to examine our systems to determine whether investing strategy is causing any problems.
If you lost thousands or even 100K+ in the stock market, then I would definitely recommend reading this book “Upstream by Dan Heath” and watching the YouTube video I’ve made for you here.
In this video, you will find:
- What is upstream?
- Why is upstream important?
- What are the 3 signs that you are thinking downstream instead of upstream?
- What’s the benefit of upstream thinking when it comes to investing?
- How does upstream apply to investing?
90% correct transcript:
So today we're going to talk about tips to prevent losses in your portfolio before they happen. And it's actually about a book I recently came across on book repository.com called upstream by Dan. So before we start, I just want to celebrate to another success story within investing accelerator, where Stacy made 30% from Facebook without using options in three months. And she made 30% from align technology as well. So if you have went to my website before, you'll notice Stacy left a video testimonial and after she mastered investing, she actually made quite a few successful investments. And here is another too. So congratulations, Stacy, you did a great job and I hope you're having a great time in San Francisco. So on book repository.com, I came across this book called upstream and it is actually about the quest to solve problems before they happen. And as I was reading through this book, I'm actually still reading this book right now.
A lot of the concepts covered in a book actually applies to investing. So if you're interested in, you know, making your investing strategy better than you might want to consider picking up this book called upstream, even though it is not directly and investing book and later on, we're going to talk about a couple of pointers as some key concepts when it comes to this book that you will may find beneficial. So in terms of the agenda today, we're going to talk about what is upstream. You know, we're going to cover the concept. Why is it important? What are the three signs you are thinking downstream instead of upstream and what is the benefit of upstream thinking when it comes to investing? And that's probably the most important part is applying to investing in help you get better in terms of investing and how does upstream apply to investing.
So I have three tips in the end on how you can apply upstream thinking to your investing strategy. So make sure you watch till the end, I was actually reading through the book and just the first story I came across at chapter one was a very memorable story, a little bit funny that I thought perfectly illustrated. The whole book itself. You and a friend are having a picnic by the side river. Suddenly you hear a shout from the direction of the water. A child is drowning. Well, tell thinking you both dive in, grab the child and swim to shore before you can recover. You hear another child cry for help, you and your friend jumped back to the river and rescue her as well. Then another struggling child of drifts into site and another and another. The two of you can barely keep up. Suddenly you see your friend waiting out of the water seeming to leave you alone.
Where are you going? You demand your friend answers. I'm going upstream to tackle the guy who is throwing all these kids in the water. When I first read it, I actually thought it pretty funny because, you know, instead of putting out fire, you're actually trying to solve the problem. And that is what upstream is really about. And of course the offer goes into a much greater detail in terms of explaining this book and a concept and how you can use it in your daily lives as well. And basically the book can be summarized in one simple image here, you'll see that there's mountain and water flows down from the mountain to the land, to the sea. And the water that is up at the mountain is called upstream. And the water that is down in the river slash to see is called downstream. So whenever people encounter problems, usually encounter it in downstream.
And most people put out fire, they panic and they try to solve the problem there. But if you actually look ahead, then technically, which is looking upstream, you can actually solve the problem earlier before they happen. And that is the premise of the whole book solving problems before they happen. And later on in this video, we're going to apply this concept to investing. And here's a quote from the book. So often in life, we get stuck in a cycle of response. We put out fires, we deal with emergencies. We handle one problem after another, but we'd never get around to fixing the systems that produces and use. It's the problems that is quite an interesting quote because more often than not, people just think they're really busy and they're not trying to reduce their busy-ness. They're dealing with problems, putting out fires, but not truly tackling the problem.
So how do you know if you are actually reacting when it comes to investing and a couple of signs or symptoms would be, you can sleep at night. You know when I was day trading. I was mainly putting out fires. I would enter into a bad trade. I would worry about it. I would wake up in the middle of the night just to check my trade, to see if it is okay. So the first symptom is you can't sleep at night. And the second symptom is that you feel like you need to trade. You don't have enough time. You feel rushed and you're jumping into the opportunity. And this usually happens when you're looking at investing in a very short amount of time. You know, you're trying to rush. You try to allocate your entire portfolio, trying to capture opportunities that is within the hour, minutes or seconds.
So whenever you feel rush, you need to trade. That means you're really thinking downstream. You're thinking about what's happening right now. Instead of thinking long term, you don't have a strategy. And if you don't have a strategy is very difficult to think longterm and think logically in terms of what is a good investment. So that's why you need to have a complete and proven strategy. And you're not subscribed to this channel. And that is probably the most important one, because if you want to prevent your investing problems before they arise and earn a higher return on the way, then subscribe to this YouTube channel now, and you'll get new videos every single month, maybe every single week as well, downstream efforts are narrow. You know, when you're dealing with downstream, they're narrow, fast and tangible. It's very often easy to see, you know, if you get wounded, you just put a bandaid on it.
It's very easy to see, but upstream efforts are broader, slower and hazier, but when they work, they really work and they can accomplish massive and lasting. Good. In terms of investing downstream is exiting a bad trade. Downstream is taking a loss. Downstream is, you know, moving your stop loss up when the market is going against you downstream is when waking up in the middle of the night, checking your trade because you're afraid that it might not go well. What is upstream? Upstream would be before you enter into a trade, you're doing some research and you can't tell what it out research will pay off or not upstream will be trying out a product that you like, that you don't know what that will contribute to your investing portfolio or not. Now stream will be, you know, searching on Google on the news, on analyst's opinions on the company, but you wouldn't know whether that will help you or not.
So upstream efforts are harder to track harder to know if they're working, but if they do work, then it can make you a lot of return and help you avoid a lot of problems too. In the book, there's actually quite a few good examples and actually took one of them out. And I just want to share that with you. So let's take a look at our, at our healthcare system, probably the most important for upstream thinking which is preventative versus downstream thinking, which is reactive for every $1 spent on downstream in healthcare. Most of us think it would be wise to spend around $2 for a, for upstream. And this has actually taken directly from the book. And this is true for most countries except U S you know, when it comes to healthcare, you want to think, well, we want to prevent disease from happening instead of reacting to the disease after people are you know, Alfred people caught the virus and so on.
So this is true for most countries except us and for us, every $1 spent on downstream, $1 is spent on upstream. So even though us has a very large healthcare budget, most of the money, or actually not most of the money where every one dollar spent on downstream is spent on upstream. So that means there is a potential to spend more money on upstream. So then you prevent problems. And the more money you spend on upstream, depending on the rewards and benefits, you will prevent problems in the downstream. So technically you can spend less money on downstream. So here's the question. What about investing? How much should you spend for downstream and how much should you spend for upstream? Add? You can just pause this video right now and just leave a comment below on what you think you would spend on downstream and what you would spend for upstream.
You know, maybe it's 80% upstream, maybe it's 80% downstream. Maybe you just have a hundred percent downstream. You just go by to God. You just go by emotions. So have a think about it, pause this video, and we'll continue after you leave a comment below. So tell me what you think is the right allocation. And here's the answer now, I'm suppose you left the comment below already. And I do read every single comment and it all comes down to control. So the question for you is really how much do you think you can control when it comes to the market? Do you control the price? Do you control how often it goes up? And it goes down, do you control? You know, when you enter, do you control which stock you buy? Do you control the allocation so on and so forth? And the truth is you don't really have much control.
You know, once you enter into the markets, then you don't really get to control what the market does. You know, it can be driven based on the coronavirus. It can be driven based on conflict between countries. It can be driven based on the presidential election and so on. And you don't have control on whether the market goes up or down tomorrow. And most people try to forecast the market and yet they fail. And this happens quite often when it comes to analysts, they try to forecast what's going to happen in the next three to five days or a couple of weeks, or even five to 10 years as well. But a truth is that is just a forecast. You know, just by forecasting does not mean you have control over the markets. It doesn't mean you can make it go up faster. It doesn't mean you can make it go up more.
So the truth is you don't have control of the market. And the more you realize that the better you will be able to allocate your money, time and efforts between upstream and downstream. Now you might be wondering, well, Eric, how would you allocate your effort? And for me, in terms of extreme, I would actually allocate all $3 to upstream. I would do everything I can to prevent a problem down the line. And ideally the money spent on downstream should be zero. Because once you invest in the markets, you don't have control at all. You know, you're just waiting. You're just waiting to take profits. So if you are able to allocate your money efforts and time ahead of time and do all the research you possibly can, that would be the best for you when it comes to investing. And that's why I think a lot of people fail with investing because they're not really thinking upstream.
They're thinking, Whoa, there's a good opportunity. I'm going to jump into it without doing the research necessary, to make sure that they, it is a win. So they spend a lot of time dealing with bad investments. They spend a lot of time panicking because they didn't expect the market to go against them. So on and so forth. Yeah, without first doing the prep work. So what are the four best upstream ideas that will help you succeed when it comes to investing? Now, the first one is that you need to do all your research. You know, all the research you possibly can today before you invest in the market. And this is probably one of the most profound lesson that I've learned over the years is that once you enter into the market, there's nothing you can do. You committed the capital. If you can only exits the markets, you can't control it.
You can make it go faster. If you need to wait. So you need to do everything you possibly can to make sure you're 95% confident in your investment opportunities before you invest. Now, once you invest, you just need to spend around an hour, a week to monitor your portfolio. And it's out of your hand now, you know, you're really just looking at the market to see if there are any problems, anything surprising that's coming your way. And even if there's something surprising, as long as it's not too out of the blue you'll just hold onto it and wait until it reaches your target price. And the third thing is really, you want to think about how you're going to exit before you enter, you know, a lot of people who think about long term investing, they never plan to exit. But I think at some points you want to determine a price in which you're happy with and that you want to take a profit.
And that is very important because you want to start with the end in mind. You want to think about where you want to go and how likely the stock price will get there before you even enter into your investment. So then that will save you a lot of pain and headache. And most importantly, the fourth tip of upstream thinking is to subscribe to this YouTube channel now and get more and new investing videos every single week and every single month. So make sure you click the subscribe button below and I'll see you in the next video. Now, before we wrap it up, I just want to congratulate Stacy again for making 30% on Facebook and 30% on a line. Technology will all even using stock options in three months and two months respectively. So congratulations, Stacy, you're doing a great job, keep it up. And my name is Eric CDOT and my goal is really to help people without a financial background to master investing and target 30% a year using an hour a week or so through a coaching program called investing accelerator. So if you want to learn more, you can click on the link below, call five minute investing.com/free case study, where you're going to attend a free webinar and I'll outline my investing strategy and also give you a lot of investing tips to improve your investing strategy as well. And then after that, if you decide to join the full coaching program, then you can schedule a call to see if you are a good fit. So that's pretty much it for this video and I'll see you in the next one.
So thank you for watching and I hope you enjoy the video. Please help support me by like subscribe and you can watch the next recommended video here as well. So I'll see you in the next one.