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Stock Investing Basics – for the probably stupid
There’s only one reason to invest in the stock market; you want to risk losing your money because you think you won’t. You’re probably stupid – Wall Street will empty your wallet and won’t even say thanks.
Recent Articles
Stock Investing and Trading – Don’t Ask, Don’t Tell
Just after placing bets people are much more confident of their horses’ chances of winning than they are immediately before laying down bets. Like other weapons of social influence, this one lies deep within us, directing our actions with quiet power.
2010 Stock Market Prediction – A Bear Market, But Maybe not in 2010!
In 2009 the United States and much of the world was awash with a tsunami of cash flooding from the orifices of spendthrift central banks and governments. Bull markets are nearly always based in easy money. In a year’s time, the major stock indices will be lower than they are today, or will they?
Investing in Commodities
If the answer is “cyclical” the question must be “commodities?”. Some investors – disciples of Malthus – believe the cyclical commodity paradigm will not persist in future. They believe ongoing shortages of commodities will drive prices ever higher.
Trading – The Zero Sum Game Not!
I’ve lost count of the number of times I’ve heard trading described as a zero sum game. Believe me, it isn’t. Let’s imagine a commodity in which there are only 5 active traders, each trading $10,000 and watch what happens.
Contrarian Investment
John Maynard Keynes was one of the world’s most successful investors. He said, “When you find any one agreeing with you, change your mind. When I can persuade the Board of my Insurance Company to buy a share, that, I am learning from experience, is the right moment for selling it.”
Luck vs Skill in Investing
It’s easy to make money investing during a boom. You don’t need skill. You just need to know the market’s rising. You then need to borrow $50 for every dollar you’ve actually got, and put the whole lot in an index fund. A couple of years later, the market’s risen 30% and for every $100 invested, you’ve got $1,500. No special investment skills required whatsoever.
Loss of Opportunity is Preferable to Loss of Capital
If you accumulate some capital, the most important thing you can do is not lose it. A trader who wants to survive and prosper must control his losses. You do that by risking only a tiny fraction of your equity on any single trade.
Mutual Fund Info – Getting the Best Deal
Watch out for performance fees charged by mutual funds and investment trusts and investment managers who, instead of saying, “hey, wasn’t I lucky”, say, “hey, it’s time to charge a fat performance fee.” They are a drag on your investment performance.
Selling Stocks – The right time to sell stocks
There is an old saying that says, “any fool can fly, but it takes an expert to land”. Applied to stocks, we say, “any fool can buy but it takes an expert to sell”. Of course, I mean sell profitably. Any fool can get lucky but if you aim to make profits consistently in the stock market, you’ve got to be an expert at selling.
The Instincts of a Successful Trader
It’s generally accepted that to be successful in stock trading we need to hold rising stocks for as long as possible and sell losers quickly. This is summed up in the trading maxim:
“Cut your losses and let your profits run.”
Do you have the instincts of a successful trader? Most people don’t. It’s not so much that they hate uncertainty – but they hate losing.
Your answers to two simple questions tell you whether your gut instincts are those of a successful stock trader.
Stock Market Timing
Card counters are feared in casinos. They represent a rare breed – gamblers who can beat the dealer. Unsurprisingly, casinos – hungry to part the foolish from their funds – have banned card counting. How can you grab the card counter’s advantage in the stock market?
Stock Market Technical Analysis
Technical analysis has been around since at least the 1600s, when Japanese rice traders began using candlestick charts to track the market price of rice. Is there any evidence in its favor, or – as some fundamental analysts suggest – is it a sophisticated superstition?
Fundamental Analysis of Stocks
It’s fair to say that pure fundamental analysis can make life unnecessarily hard for most investors. Stockbrokers employ large numbers of economics and accounting graduates to carry out fundamental analysis and stock valuation. Although many authors like to propagate the myth that you can easily beat such analysts, the reality – measured by the success of small investors in the stock market – is that most small investors invest rather poorly.
Investment Trading
An investment is bought for the long term – to fund retirement for example. Investors are more like car-collectors than dealers. They learn as much as they can about what they’re going to buy and would love to hold their purchases for the long-term.
Market Sentiment
Many of the world’s greatest investors monitor market sentiment and use their findings to identify major market turning points. Here we look at some of the key signs that a sentiment-driven market may be about to turn. At these times great wealth can be acquired or lost.
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