The stock market is:
(a) A quick and painless way to make money. The emphasis is on fast and easy or;
(b) A black hole where you amateurs are doomed to lose their all their money, at least over a long period of time.
The answer is of course C, as you guessed.
Easy question but always an easy answer to prosperity in the market. There’s a lot written about “How to Make a Killing,” everything from complex mathematical formulas that when faithfully followed that promise riches to far simpler schemes that cite days of the week or month as more propitious then others.
One given about the market was uttered by J. P. Morgan when he was asked what the stock market will do.
“It will fluctuate.”
With that in mind, here are a half-dozen rules that most lucid observers think will always apply:
- Expect them but don’t fear fluctuations. (see above, Mr. Morgan). Price ups and downs are always around. They will stubbornly remain numerous and sudden. Don’t panic or buy and sell on a day or so of frantic activity one way or the other.
- Even if you are an experienced investor, listen to your instincts. Some deals will sound fantastic on paper or when a convincing and charismatic salesman describes prospects. But recall that Ernest Hemingway wrote that everyone has an (expletive deleted) detector. Hear and heed it.
- Stick with what you know or can learn. Do the necessary educational effort to understand the business you are investing in (if you don’t already know a great deal about it).
- Keep your emotions confined to exciting movies and romantic vacation daydreams. But keep a hard head or a rational brain for investments. Also keep in mind that unlike a movie or a vacation, sometimes it’s best to just stay home (or not invest). And never fall in love with something in the market.
- The stock market is not short term, not for amateurs. Fads like the hula hoop come and go. Investors do make money on them. But don’t count on catching the fleeting fad very often. Some investors have caught the wave and never forgot it. They later lost what they gained.
- As in #4, always think long-term. You are not in in for they call the “quick buck.” If that’s your goal, you’d be better off at Atlantic City or Las Vegas. Your odds may even be better there, depending on your particular choice of game.
There are other rules, so do not get complacent. Never make the mistake of thinking you know all the rules, either, believe me. The learning curve here is as so steep you will never climb to the top of it.