So you want to invest huh? Well let me tell you something:
You suck at it.
Now don't get me wrong, I'm not saying that I know it all or even that I am good at it, but what I am saying is that I can follow a very specific set of rules. While I am not a fan of rules, sometimes they are okay...as long as you make them yourself. Just because I am about to share with you my rules, by no means am I saying to take them as your own. If you do that you are a fool. I can use these because I have been using them for years, not because they are full-proof.
If you want to just follow some rules and make some money then go ahead and go down to the local fast food chain and work there. If you want to research, read, and develop your own strategies to make some money then go ahead and read on.
My Five "Priceless" Rules of Investing
- Invest Regularly.
Let me tell you something that no matter how long you trade stocks you will never have completely figured out: Timing. If you think you will figure this out, stop, re-read the last sentence then read on. The only thing that solves timing is to invest regularly. I don't mean just dump money into random positions but invest every month, twice a month, weekly or so on into something you think is undervalued. By doing this, you will over time create a portfolio that you feel is a safe bet.
For me the only thing I hate more than people that talk to much on StockTwits are the idiots that end up losing their entire portfolio because they were too dense to figure out that their "sure thing" was actually a pile of garbage. Even the best investors lose on something that they thought was an opportunity, ask a certain hedge fund manager that just sold his position in a certain pharmaceutical company.... For me this looks like no more than 10% in any position at any one time. I don't care if you only have $1000 bucks in your portfolio it all shouldn't be in one position. This is also why I like low fee brokers like Robin Hood when you are starting out investing.
- Lock Yourself In
When you buy a car or a house you do thorough research and look at multiples before you make a purchase, but when you buy a stock you take a quick look at some post on some idiot's blog and buy it. Why? Because there is nothing keeping you holding the position for any specific period of time. Now what if I told you that you had to hold that position for a year? Then what if I told you the only time you could make a change was after the annual report each year. A little bit different huh?
- Re-define What "Substantial Gains" Means
When I look online at who people pay or go to for advice I tend to see the same records getting played over and over again. There are chat rooms that make picks and say they go for 500% gains each week. Guess what? If you can make that in a week I bet you can lose 100% in that week as well. In my opinion substantial is a stock gaining 10% a year for ten years. That means that I add over 150% to my original investment every ten years. If I get more than that then I am very happy. If I lose ten percent or more, then either I now own a position that is really undervalued or I need to review the current direction of the company and figure out if I still need to own it.
- Read, Read, Read Some More
If you want to handle your own money then figure out how to continue your education on that subject. You don't have to get a finance degree to handle your money but you sure as hell have to at least know how to read a quarterly report. If you don't want to spend some time learning about what you are putting your money into then leave it in your savings account and get the crumbs that the bank is willing to give you. Investing with out learning is a really easy way to lose your money.
I want to make sure I repeat that the above rules are not for everyone. You may make a ton of money by doing the exact opposite of what I am saying but that is what I follow.
If you think that I am an idiot, let me know in the comments section, or if you have other rules I would love to hear those too!