Playing the stock market

Stocks are a great way to invest your hard earned money and while they’re not a sure gamble, they’re a lot easier to hedge your bets on (haha, get it? hedge your bets) they’re not foolproof. Yet, you can minimize your risk by taking the following few tips that I use for my own portfolio:

  1. Don’t buy and sell stocks based on rumors or stock tips. If you don’t know of a corporation, don’t buy based on your friend’s advice. In the end, it’s your money, not theirs. Do your homework.
  2. Did I mention do your homework? Corporate activity is effected by everything from market news to the political stance surrounding the market or even the physical region. Read a lot. Then read some more.
  3. Never ever regret or get upset that you didn’t sell at the right time. If you’re making a profit, then that’s better than what you started out with, right? The best of traders can’t predict the exact times for highs and lows. But if you’re good at reading the stars charts, you might be able to get close. If you’re taking a loss, then consider if you should cut your losses or hold out for the better.
  4. When it comes to technology stocks, don’t jump at the daily rises and falls. A good stable corporation will have trends that rise and fall on more of a quarterly basis. If you get agitated with every single jump, you might be better off in slower moving markets.
  5. Don’t ever invest more than you’re willing to part with. Always realize that stock investments can take a turn for the worst and you could lose it all. It’s interesting that many individual traders play the market without going through this conversation with one’s self. If you’re afraid, you’ll be better off having a savings account.
  6. Afraid of doing the research but still want a piece of the action? Consider mutual funds. Someone else is managing your money and investing it but the choices and risks becomes theirs. It is how they put food on the table, so they’re probably better than you at choosing the right picks but it doesn’t mean mutual funds don’t go south either.

This isn’t stock advice really. It’s just what I do to make sure I’m in the black as much as possible. This doesn’t guarantee anything just like it doesn’t for myself, but it does minimize my risk by removing risky behavior. Since I take no responsibility in your investing behaviors, follow the tips at your own peril.

  • Your advice is good, but in the end a consumer is just gambling when selecting companies. No matter how much homework you do you will always be out of the loop when it comes to corporate decisions. Play the entire market through Index mutual funds as an easy way out when in doubt.

  • Your advice is good, but in the end a consumer is just gambling when selecting companies. No matter how much homework you do you will always be out of the loop when it comes to corporate decisions. Play the entire market through Index mutual funds as an easy way out when in doubt.

  • Corporate decisions don’t mean anything if analysts play it up or down. There’s still trends you can follow.
    I don’t buy the index mutual funds bit. That’s no less gambling than picking your own stocks. Less risk since you believe that the mutual fund managers do that to keep their job. But on the flip side, it’s “not their money.”
    Either way you look at it, it’s a gamble. The point is: any gambler knows that if you have more information and can read the tables, then you’ll have an advantage over anyone that does not know and is playing on blind luck.

  • darkmoon

    Corporate decisions don’t mean anything if analysts play it up or down. There’s still trends you can follow.
    I don’t buy the index mutual funds bit. That’s no less gambling than picking your own stocks. Less risk since you believe that the mutual fund managers do that to keep their job. But on the flip side, it’s “not their money.”
    Either way you look at it, it’s a gamble. The point is: any gambler knows that if you have more information and can read the tables, then you’ll have an advantage over anyone that does not know and is playing on blind luck.

  • patrick

    I was just focused on Step 6. You qualify that step as for those not willing to do the (in my opinion) extensive legwork to create their personally managed portfolio.
    So, Step 6 should present the option with the historically best returns and least decision making. Indexed mutual funds fit both criteria.
    I agree completely with the educated gambling … I just want folks to acknowledge the this particular game isn’t blackjack or craps … this is a complex game that people devote their lives to playing and perform poorly at it.

  • patrick

    I was just focused on Step 6. You qualify that step as for those not willing to do the (in my opinion) extensive legwork to create their personally managed portfolio.
    So, Step 6 should present the option with the historically best returns and least decision making. Indexed mutual funds fit both criteria.
    I agree completely with the educated gambling … I just want folks to acknowledge the this particular game isn’t blackjack or craps … this is a complex game that people devote their lives to playing and perform poorly at it.

  • Very true on the index funds.
    In actuality, I don’t see much difference between blackjack/craps to stock market play. There are more variables, but the fundamentals are still the same.
    1) It’s a gamble. No matter how you maximize your chances, and minimize risk, if the dice rolls wrong, you could lose.
    2) It can be shown in mathematics. With the market, there are actually pretty decent formulas that have made some financial institutions very wealthy. With blackjack, you can give statistical referencing to what percentage of hand you’ll have versus the dealer.
    3) Lady luck falls in all games of chance. There’s nothing to losing it all in craps, but neither did anyone predict the crash of 29, or 87.
    Complex or not, people need to realize that the stakes are no different from casino gambling. You can apply many methods to sway advantage, but in the end: there’s a chance you could lose all your money. Even with an index fund. If you’re past that part of the risk, hopefully some of the tips above can help someone else besides myself.

  • darkmoon

    Very true on the index funds.
    In actuality, I don’t see much difference between blackjack/craps to stock market play. There are more variables, but the fundamentals are still the same.
    1) It’s a gamble. No matter how you maximize your chances, and minimize risk, if the dice rolls wrong, you could lose.
    2) It can be shown in mathematics. With the market, there are actually pretty decent formulas that have made some financial institutions very wealthy. With blackjack, you can give statistical referencing to what percentage of hand you’ll have versus the dealer.
    3) Lady luck falls in all games of chance. There’s nothing to losing it all in craps, but neither did anyone predict the crash of 29, or 87.
    Complex or not, people need to realize that the stakes are no different from casino gambling. You can apply many methods to sway advantage, but in the end: there’s a chance you could lose all your money. Even with an index fund. If you’re past that part of the risk, hopefully some of the tips above can help someone else besides myself.