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16 Comments
- marksven, on 10/12/2007, -0/+2This is a great guide for how to do speculation (aka gambling) in the stock market. Don't fool yourself by calling it "investing". The only way to consistantly make money in the market is to buy conservative stocks, bonds, and mutual funds at unreasonably-low prices, and hold onto them for many years before selling. This is a great book to read:
http://www.amazon.com/gp/product/0060555661 - enhanced, on 10/12/2007, -1/+2I welcome and deeply appreciate all input, whether it's a nice comment or criticism. I think we need criticism to grow.. in my case I think I need to become a better writer: more thorough articles, but cutting out a lot of the fat.
I'm sure I will post more articles to digg in the future, but only those articles I feel have substance or good content that people (particularly traders and investors - including people new to these subjects) will benefit from, learn from or find interesting. I'm definitely not going to post *every* article like some people I see on digg. :)
-Nick - rtwolf, on 10/12/2007, -0/+1I completely agree with marksven and sachmanb there and I'd like to add some stuff.
First thing is for most people trading or investing isn't the best option. That includes many people on Wall or Bay Street. For most people a simple index fund is the best solution, especialyl considering an index fund has beaten out most managed funds in the past many years. Just get an index fund and keep adding.
Most people think that they cna beat the market but I can garuntee you that it is ridiculously difficult. People tend to be more optimistic about their skills than they are. With the advent of easy online trading, people take the illusion of trading as a testament to their skill as investors. If you do follow this method in the article, I would recommend at least keeping very close track of your returns. The usual period is one year. At the end of that year, see how you did versus an index fund. See how you did against a solid portfolio of undervalued stocks. See how you did against a value mutual fund.
Keep in mind that the principles Warren Buffett (and many others) used to become some of the greatest investors ever are described in The Intelligent Investor. Try to name as many rich traders (who became rich by trading, not fees) as there are rich value investors, or compare their returns and I hope you'll see investing is simply more intelligent.
www.fool.com might help. there's many other sites that have information of value investing, too.
Good luck! - sachmanb, on 10/12/2007, -0/+1Marksven is completely right, and that is exactly the right book to link (Intelligent Investor). Investing isn't following prices, its investing into businesses. This is the mindless investment strategy's that inflate value and then deflate value simply because it's going well -- which is nice for the rest of us =).
- jayc, on 10/12/2007, -0/+1Trading in individual securities, especially for the short-term, is a losers game. It's complicated, it's risky, and you can do better.
I'll give you my article for successful investment:
* Diversify (use mutual funds)
* Cost matters (use no-load, low-cost funds from Vanguard or Fidelity; I consider starting an expense ration around 0.5%+ to be high)
* Stay the course (determine your risk tolerance and invest accordingly so that you don't sell the next time the market has a correction or recession)
(hat tip to John Bogle)
If you wish to be a successful investor, read up on efficient market hypothesis and indexing. I suggest William Bernstein's "The 4 Pillars of Investing," personally. There are many others. Just buy something with a boring cover that doesn't claim you can get rich quick. - inactive, on 10/12/2007, -0/+1Well, I guess this guide would come in handy when your TYPICAL digg poster has a few dimes left over from the ALLOWANCE they get from their parents, or the money that they make delivering newspapers.
- linc0635, on 10/12/2007, -1/+2Good idea, though the plan seems to be mainly if 'X' happens then I will do 'Y'. I would add that you should also write down your expectations for your investments and and the markets periodically (i.e. what do you expect 'X' to be?).
For example, what do you expect oil/property/interest rates to do over the next 12 months and so on. That way you get a feel for what type of investor you are and whether you have any predictive power. Otherwise the brain has a way of making you think your predictions were better than they actually were. - enhanced, on 10/12/2007, -1/+1Hi Linc,
You make some great points which I will address in a future article about trading plan. There's really so many things to cover when you develop your plan. My purpose isn't to give someone fish, but rather to teach them to fish on their own. Do you think my article helps from that standpoint?
Best Regards,
Nick - linc0635, on 10/12/2007, -1/+1Yes I think it's a solid article. I wasn't criticizing, just elaborating I guess. If you're going to post more stuff in future I look forward to seeing it. Totally agree with the teaching to fish mentality.
- wood1972, on 02/12/2009, -0/+0I initiated a position with ACXM, it's a risk arbitrage situation that looks very attractive to me. I'm going to start looking for more tech-focused merger situations, I think these can offer good returns with the market conditions right now, and they're fundamentally strong. LTD has taken a big hit lately, I still believe its a great buying opportunity because they've sold off some key brands. Once I free up cash I will deploy more to LTD and possibly a risk arb situation like PHH.
- SeanFL, on 10/12/2007, -0/+0Yep on the Vanguard and low cost investing. Set up two mutual funds and you'll most likely receive better returns than high levels of speculation will bring.
80% Vanguard total stock market
20% international index
Set up automatic monthly investing (so you dollar cost average) and then don't touch.
enjoy the returns and less paperwork each year. It took me years to realize that it's very difficult to beat the market over the long term. I went from dozens of stocks, a dozen mutual funds down to just a handful. There are some who can beat the market. How about over 10 years? - kichler, on 10/30/2008, -0/+0Wow, thanks for providing the information, this is an unexpected chance to asses my stock trader capabilities as I am making plans to invest in stock market. You don't often get this kind of information for free. Thanks again!
http://www.onecfd.com/web/guest/OneFinancial - pfxglobal, on 07/14/2008, -0/+0Jay C. is 100% correct. Long term investors make money. Short termers lose. Here's an article about it:
http://www.learningmarkets.com/index.php?option=co ... - MickaFX, on 02/19/2008, -0/+0A good trading plan uses good trading systems. I found a list of reviews here:
http://www.advancedtradingsystems.com - whalt, on 10/12/2007, -0/+0This guy's response where he starts comparing the rules of his "system" to betting in poker should tell you all you need to now. Do you want to gamble with your money then go right ahead but just remember Las Vegas wasn't built on people winning.
I also like his logic that daytrading must be profitable or their wouldn't be any daytraders. He's right in that it is profitable, for brokers collecting fees and guys like him who sell you their "system," not so much for everybody else. Gambling must be profitable too otherwise there would be no compulsive gamblers!
Ask yourself this about his or any other "system" to get rich quick, if it really worked, why would they be telling you about it instead of just applying it themselves and keeping it as secret as possible to maximize thier advantage? - enhanced, on 10/12/2007, -0/+0Hi,
Looks like my article has generated a lot of comments. :) In my opinion, trading and investing are 2 completely different games, like "texas hold em" and "seven card stud" poker games. You can't use hold 'em strategies in seven card stud. As such, trading strategies do not apply to investing - at least most of the strategies will not work. This article was geared more towards traders, not investors.
My personal strategy includes both trading and investing. There are always great short term plays. You have to know what to look for and when to take advantage of the opportunity. Most of my portfolio is allocated to long term investments of 1+ years.... mostly due to greatly reduced capital gains taxes. However I do have some cash available for short term plays, perhaps a single day's trade, or a swing trade of a few weeks.
I definitely agree The Intelligent Investor by Ben Graham is a GREAT book. I do own it. For investors this is one of the best resources available. For traders, some of the stuff he says is useful but Graham thinks like an investor, not like a trader.
Daytrading can be very profitable. If it wasn't, there would be no daytraders at all. Yet, there are many. Daytrading strategies include swing trading, scalping, etc. I know some millionaire swing traders that are doing great. They don't invest long term at all.
For *most* people, investing is definitely the way to go. Trading takes a lot of dedication in terms of time, education, experience, etc. You can't become a trader overnight and expect to do well. The same is true with investing, but investors hold stocks a lot longer and generally the overall market will go up after time.
For everyone - traders and investors alike - I would recommend checking out ETFs. I own some ETFs in my investing portfolio, but I know many people that day and swing trade ETFs. Some great ETFs can be found at http://www.powershares.com and http://www.ishares.com
Thanks again for the comments, criticisms, and diggs. I am working on some articles geared more towards investing, rather than trading, which you may find useful and beneficial. My site for investing is http://www.InvestingWinner.com but Trading Winner gets updated more often.
Best Regards,
Nick
TradingWinner.com
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