| |
| |
|
|
|
|
|
When NOT to Invest
Unfortunately, many investors who are seduced by the lure of easy money try to become "active" investors before they have the skills, the resources, or the appropriate intellectual framework to do so. This is not to say that investing in stocks is extraordinarily difficult ... It is not! However, beating the market on a regular basis is far from easy and requires that an investor bring to the investing process a singular discipline, knowledge, or passion that will allow him to rise above the herd. Like in any other competition, not everyone can win! In fact, for every amount of money that outperforms the market, somebody else's money is not doing quite so well! How can you tell if you are ready to become an "active" investor? Not an investor who buys and sells stocks on a regular basis, but active in the way the academics mean it -- someone who selects his own stocks. It is not like there is a licensing process or anything. In fact, there is not even a formal course of instruction. Much like parenting, you tend to find out if you are really cut out to be an investor only after you have made a pretty substantial commitment! In my opinion, you should not be investing in stocks: ... If you need the money within two to three years at the least. ... If you don't like to do math. ... If you use the word "play," "gamble," or any similar speculation-oriented word when you describe your investments! ... If you think indexes matter more than what companies you own. ... If you are unprepared for volatility. A lot of people look at the returns for the stock market only to turn pale at the first loss! If you cannot stand to lose money, you should not own stocks... Period! ... If you think you will only ever buy stocks that go up. You are not perfect! No system is perfect. No provider of advice is perfect. You can -- and will -- lose money at some point during your investment career! You can minimize this loss if you do your homework and are careful about valuation, but money lost is money lost. ... If you believe that the share price alone or share price movements alone tell you anything about the underlying quality of the company or its business. All too often people buy low-priced shares with the idea that they are cheap, only to find out that they are low-priced because the underlying business sucks. ... If you couldn't write down a list of why you bought and what might make you sell. If you don't know why you bought a stock in the first place, how can you know when to sell it? Bad scene. Avoid it. ... If you cannot tell the difference between a balance sheet and an income statement. Especially if you don't even know where to find a copy of either. ... If you cannot make a rudimentary assessment of the underlying quality of a company. ... If you cannot define any of the following words: gross margin, operating margin, profit margin, earnings per share, costs of goods sold, share buyback, revenues, receivables, inventories, cash flow, estimates, depreciation, amortization, capital expenditure, market capitalization or valuation, shareholder's equity, assets, liabilities, return on equity. ... If you only have one source of information about the company. I don't care whether it is your best friend, a message board, or some content provider. If you cannot independently verify the facts, you are bound to get unintentionally bamboozled. No one likes to admit he is wrong. If you depend on one source of information, odds are when it finally coughs up the conclusion that it made a bad call it will be too late! ... If you cannot name the major products a company makes or the company's major competitors. ... If you don't use the Internet. Seriously folks, come on! Almost all of the disadvantage of being an individual investor from the information side was erased by the Internet. If you aren't on it, you are at a major disadvantage to all of the other players. It is like trying to wrestle with no limbs! Ioannis - Evangelos C. Haramis was born in Greece in 1951 and he studied in Greece, USA and in Belgium. He has been active in the stock markets since 1972. Since 2002 he is New Business Development Managing Director at an Investment Bank and the publisher of http://www.greekshares.com Copyright © 2005 I.E.C. Haramis haramis@greekshares.com
MORE RESOURCES:
Investing - Google News |
|
|
|
RELATED ARTICLES
Retirement Is A Scary Proposition If Youre Without A Plan, And Running Out Of Time Of the 75 million baby boomers nearing retirement today, many are:* Debt Ridden* Severely unprepared for retirement* Under Funded* Without a StrategyThis is a very serious problem in a country that we can all remember used to assure most people of a retirement where you are taken care of financially.We all know that social security alone is not the answer to this problem. Financial Planners "Financial planners are like dentists: they may occasionally inflict pain, but in the end, you will be better off for following their advice!"Whoever wrote these lines must have either been a financial planner or someone who relied heavily on planners for finance management. We all know that planning our finances is vital. Five Sure Fire Way to Secure Your Financial Future "You can be poor when you're young, but you can't be poor when you're old." That was the tag line used some years ago in a financial services television commercial. Value Investing By definition, value investing is the process of selecting stocks that trade for less than their intrinsic value. A value investor typically selects stocks with lower than average price-to-book or price-to-earning ratios. Realistic Investing Expectations Over the long term stocks have provided us with great average return results. But this average return masks a great deal of volatility, because returns have fluctuated within a very wide band. Wit and Wisdom on Money, Wall Street and Success - Part #2 Here are ten more WISDOM packed GEMS that ooffer very unqiue insights to the world of trading and investing.These quotes promote a philosophy which is readily understandable and sometimes hysterical. Wit and Wisdom on Money, Wall Street and Success - Part #1 I love to collect quotes as they concisely promote a philosophy which is readily understandable.In my 25+ years of investing I have collected hundreds of quotes related to Wisdom, Wall Street and Success. Success Trading: More Basic Terminology for New Traders One important aspect of trading the markets is to understand how to feel it's overall pulse. In the stock market, this is measured by measuring the movements of selected stocks across various sectors to let us know how the market is doing in general. Do You Need A Financial Planner? No matter how much money you make, it pays to keep on top of money coming in and going out. Even if you do a good job of that, there are important times in your life when talking with a professional adviser makes sense. How To Create Wealth In The Stock Market First and foremost, an opportunistic strategy for creating wealth in the stock market is needed. And the opportunistic strategy for creating wealth in the stock market must have two ingredients, a plan and a goal. Have You Ever Seen A Map of the World Turned Upside Down? For those accustomed to viewing things a certain way, it is quite disconcerting. One almost expects the ocean to pour out. Going Against the Conventional Investment Wisdom First of all, I want to give everyone the disclaimer that I am not a registered financial advisor and I don't play one on TV. Therefore, I cannot legally provide financial advice and I will not do so. Volatile Oil The Light Crude Continuous Contract fell from $67.70 a barrel on Monday to $62. Can Your Annuity Do This? Many people buy annuities according to their agent's recommendations. However, many people do not even know what they own. Now is the Time to Invest for Your Retirement! Yes, it's the time we've all been waiting for?tax season! We know you've gotten a jump start and filed early this year, right? Of course not, but rather than dreading this part of the year, we should all look to it as a point for new opportunities. Many readers don't realize that even though the New Year has come, they can invest money as if it were still 2004! That's correct, it's not too late. The Myth of the Earnings Yield AbstractA very slim minority of firms distribute dividends. This truism has revolutionary implications. Rules of Simple IRA Your Business Needs to Know A Savings Incentive Match Plan for Employees plan, better known as a SIMPLE plan, is an IRA-based retirement plan available to employers with fewer than 100 employees.Under a SIMPLE IRA plan, an employee can contribute a portion of his pay to his SIMPLE IRA account. Which IRA Is Best For You? An Ira is one of the greatest ways to save on taxes currently and accumulate money for the future.For individuals three types of IRA's will normally come under consideration. Porters Five Forces Analysis If you've ever listened to Warren Buffett talk about investing, you've heard him mention the idea of a company's moat. The moat is a simple way of describing a company's competitive advantages. Protecting the Tax Advantage of Your Deferred Compensation The American Jobs Creation Act of 2004 imposed strict new rules on non-qualified deferred compensation plans. Beginning in 2005, deferred compensation programs that are not in compliance with the new rules may be taxed as wages, slapped with a 20% excise tax, plus charged an interest penalty.
|
