Friday, January 4, 2019

Why Good Stock Market Investing Strategies Go Bad

I wanted to spend today talking about why good stock market investing strategies go bad. I’ve got a friend who loves investing in the stock market. He spends hours reading about all this stock market investing strategy and that one. One day, he’s investing in options. The next he is selling an index short. The problem with this is that he never quite excels at any of his strategies because he’s too busy trying the next best thing and not working on one specific investment technique. I think this is a common problem and it’s also not helped by the things I talked about in my post about stock market investing for dummies. Rule number one of any investor should be this – become a master at one specific strategy. Taking this one particular step will drastically improve your results.
You see there are all kinds of ways to make money, as well as lose it, in stocks. There’s no shortage of ideas. You can be a value investor or a growth investor. You could focus on penny stocks or on options. There’s always exchange traded funds and indexes or mutual funds. The key for you is that you must pick one and then spend all of your time working on mastering it.
One of the reasons that flipping from strategy doesn’t work is because each requires a certain set of tools and experience. If you are new, then you can bet that you don’t no what tools you should use nor the experience to implement the strategy correctly. They all require a different learning curve. It’s this learning curve that could cost you a fortune over time both in losses or opportunity costs. Let’s face it, if a mutual fund manager can manage your money better than you, you should give it to him (or her).
So if you are going to bother to spend time buying stocks, then take the time to become a master of your craft. Learn one strategy, start practicing it and then throw real cash at it.
The problem with most individual investors is that they invest real cash, never practice and never really hone in on a winning strategy.
Which investment philosophy should you choose? It probably doesn’t matter just as long as it has proven to work. Study the masters like Benjamin Graham, Warren Buffett, William O’Neil or Peter Lynch. Follow their system and make it your own.