10 ways to over-complicate investing and lose money while doing it! Or, Why my five year old can pick stocks better than you.
The number one rule in stocks is: Buy low, sell high.
Listen, stocks are scary, because you are investing money and you may lose some of it. But, you go to Vol*dMart to buy groceries every other week, and your probably spending a lot more on those goods than you are on stocks. Why is it so hard to buy stocks?
There are a lot of psychological reasons why buying stocks is hard:
1) You want the perfect stock! The more choices there are out there, the worse you’ll believe your final choice is (seriously, watch this. It will blow your mind); so you hesitate and lose all initiative.
2) You want to buy it at the perfect time! There is no way to know when the perfect time to buy was, until it is in the historical record. Just buy when a stock is really low, and hold the sucker till your 59. I.e., It’s like, you go into Target and see a winter jacket on sale for 33% of it’s previous price, but its June. Since you needed a jacket the previous winter, and had been planning on buying one anyway. You buy it, and next winter you have a good coat.
3) You don’t know what your doing: I get this, but really, it’s no more complicated than buying a cart full of groceries. It’s way simpler than buying a car, because, heck, if you don’t like it, you just sell it right back and the price is pretty much the same!
4) You worry about the company going out of business. OK, read up on the company, a little. But don’t over think this. If 5 professionals say, “Hey this company rocks!” It’s probably not going anywhere.
5) You see a company on MSNBC/FOX Business/CNN Business etc., in trouble, and you shy away from it — but those are the only bargains you see. Well, you don’t get $0.15 off a dented can of soup cause it’s pretty! And it’s still the same soup!
6) You want to buy the next Google, Amazon or Microsoft, with penny stocks, but don’t know which one to buy. Here is the truth, all of them are extremely risky, and 99% of them are garbage. Do you have time to look into these companies? I don’t, and this is one of the two mutual funds I own (small cap and medical insurance). Let the pros figure this out.
7) Your friends/coworkers/relatives/bus boy know more about stocks than you, and you know you can’t compete, and so you don’t. Well, that solves your problem of having to compete with them! But there is a simpler method: Don’t judge your portfolio/decisions/life by other people. Judge it by itself: is it getting better? Just ignore other people. There will always be people smarter, richer, and better at anything/everything than you. But, there will always be someone better than them too.
8) Too many numbers, graphs and ways of looking at this crap! Seriously, there is. Ignore most of that it (look at market cap, dividend, P/E ratio, price and some ratings — done!). Again, if the professionals are saying buy, it is probably OK to just go and buy it. I know there are a lot of serious investors out there who will need some knappy wipes after reading that last sentence, but just because She/He doesn’t know if a company is good or not, doesn’t have any bearing on whether the company’s good! Other people can be right! And another thing these “super knowledgeable” investors seem to forget: It’s pretty easy to buy and sell stuff. If you buy it low, and it goes even lower, you can just wait (or even buy more!). If it goes up, great! Whats the big risk? I don’t understand it …
9) Stocks aren’t safe! Look, if I had bought 10 share of the S&P 500 when I graduated high school in 1993, it would have cost me $4630 at its highest point – at it’s lowest point in the past 10 years, it would have been worth $6830. That is still a profit of $2200. If I had kept it until this very moment, it would be worth: >$15,000, and that is after TWO horrible stock market crashes and the biggest depression since 1930! Lets see your savings account do that!
10) Investing needs to be super-sophisticated. Well, hate to tell you buddy, but you’ve been lied to your entire life. The best diet? Eat less. The best pickup line? “Hello, I find you attractive. Would you like to have coffee sometime?” Best solution to a mathematical/scientific conundrum? The simplest explanation The best way to make money in stocks? Buy something.
Take home message: Buy stocks of companies you know. Don’t think a lot about it. Really, that’s it.
Don’t watch the market news, don’t dither, don’t read the WSJ. Don’t log-in and look at your account all the time. Just buy a solid company, and play with your kids. Simple.
And tell your self this: If you were explaining to your child about a company and you said, “You know, ___, where we have shopped your entire life, and where mommy and daddy shopped with their grandma and grandpa? The one that’s on every corner in America? Yes, that one. Do you think it will be there tomorrow?” My 5 year old could pull the trigger on that one!
Posted on 02/27/2013, in SG Investment Philosophy and tagged Children, DIY, Education, Future, investing, Kids, Olean, Personal Finance, Personal Investing, Retirement, Stocks. Bookmark the permalink. 4 Comments.