The sad truth is most bull markets of the past have ended when "everyone" decides to jump in. You know you are in trouble when your cabbie or barber asks "so, did you buy stock X? It has doubled in the past 18 months so I just bought some today." Even in this bull market, there have been cases of "irrational exuberance" where stocks like Netscape were bid up to over 300 times their earning. Sadly, many saw this as a "sure thing" since "everyone will have to use a browser to access the internet" and they bought with no reguard to the fundamentals. When Netscape recovered to more reasonable valuations, these people lost alot of money.
OK, hopefully you are now a bit wary of thinking you can make easy money in the stock market. Now you are ready to ask people like myself "how did you make above average returns or even match the market when so many experts couldn't do so well?"
My answer is simple. I got all the information possible and read it BEFORE making any major purchases. Furthermore, I made sure I knew what I was buying, why I wanted to own a particular investment, how did it effect my overall asset allocation, what was my tolerance to risk - could I see a half a yrs salary go away in a single trading day? - was I in for the long term or just to "experiment", was I willing to do the work to really learn just as if I were back in College? Simply put, I looked before I leaped.
My next article will discuss "Metrics". Maybe the title will read: "Metrics - The first step in improving something is to measure it".
I'm open to what I will discuss in this forum, but I hope to pass on a bit of what and how I learned what was needed to make wise investments.
Go To Page: 1
| Here's the follow-up discussion on this article: | View all related messages |
For a complete listing of article comments, questions, and other discussions related to Kirk Lindstrom's Investing/Personal Finance topic, please visit the Discussions page.