I have a lot of thoughts on investing I want to share with you guys. As you may know, I prefer to write long posts, and none of these individual thoughts take a long time to describe. So I’ve decided to group these thoughts together into Random Thoughts on Investing – September 2011. You may or may not agree with my thoughts, but that’s ok. It’s always good to read about others’ opinions. In the comments section, I hope to read your opinions too about my thoughts.

There are old investors, and there are bold investors. But there are no old and bold investors (all the old and bold investors are dead!).

Investing is all about risk management (we’ve all heard about that before). Know you’re level of risk comfort, the experts say, which is true. But there’s no way I’d cover all of this within a few paragraphs. There are entire university degrees devoted to understanding risk management. Anyways, the basic principle is that it’s better to control your risk than to go after a wildly profitable (and wildly dangerous) investment opportunity. If you lose 50%, you’re going to have to earn 100% to make that money back.

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Commodities are mostly shunned by the average investor, for some reason or another. Investing in commodities simply isn’t as popular as investing in stocks (God knows why). But what many fail to realize is that investing in commodities can be far more profitable (or far more unprofitable) than investing in stocks. Let me first tell you a little bit about my experience with investing in commodities.

As you might guess, the first commodity that caught my attention was the almighty bling. Gold. It was 2008, when the “Gold 1000″ chant was raging. A habit that my mother gave me was to always take a few months to study a market before actually investing in it. So I looked at it. I looked at the technical charts. I looked at those charts some more. And based on the factors of resistance at the 1000 barrier, and an ever weakening economy, I shorted gold (actually, I shorted a gold ETF) at around 920. I held onto my short position for 3 1/2 months, and I made a bundle. My next experience with commodities was far more profitable. It was in silver. Amongst commodity investors, silver is shunned more often than gold, for reasons I don’t know. Silver’s volatility far exceeds that of gold, hence trend investors like me love the silver market. I bought 100% into silver in September ’10, and as you can guess, I more than doubled my money in the following surge in silver prices.

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We’ve all made mistakes when investing, but I’m fortunate to have made fewer deadly mistakes than most. Let me tell you a story about how I lost 9.1% of my portfolio’s value in 3 and a half months, and what you can learn from my loss.

It all started in the beginning of June 2010.

From a fundamental standpoint, I clearly foresaw the dark economic clouds coming up ahead. I knew that the economy hadn’t really recover; it was QE1 (first round of quantitative easeing) that stopped the fall of stocks and lead the economy into an artificial recovery. I felt that stocks had risen too much and too high, so then was the time to go short. The fundamentals in the economy simply did not justify such high prices in the stock market.

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I’m looking for a major change of my investment portfolio today, so today’s post will be short but sweet.

One of the lamest comments usually spoken by brokers who are gunning for commissions is:

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The following investment rules are made especially for tough investment environments (such as now). These rules give good investors a plan to follow, just when they need it the most. The following 9 rules are especially useful in times of extreme market volatility or when the markets are irrational.

Markets will eventually return to the average.

When stocks go too far up, they will come back down. When stocks fall too low, they will come back up. Market excess in either direction will eventually disappear, and the markets will go back to the average. It’s far too easy for investors to follow the herd and lose a proper, rational mentality.

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Many investors start investing with a hope of out-sized returns. But in the wake of the recent stock market crash 3 years ago and the economic recovery shaking up, many investors have had that assumption shattered. My job here in this post is to explain to you six possible reasons why you’ll fail at investing. Commit any one of these mistakes, and you have a pretty high chance of getting on the fast-lane to the poorhouse.

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