Stock Market Books

Product Description
Everyone would like to get rich quick. Scams abound and the stock market can make or break the bank. However, there is a fortune to be made provided investors have a good game plan. Written by investment expert David Rye, this book shows investors how to avoid the common mistakes and pitfalls of investing in today’s stock market. Serious and first time investors alike will benefit from the wealth of advice contained in these pages. The author provides step-by-step … More >>

25 Stupid Mistakes You Don’t Want to Make in the Stock Market

Displaying overconfidence in the news and research reports appearing in print or electronic media carrying opinions or views of stock market analysts is problematic. It is valuable to realize that for every analyst report making a correct forecast, there is another one forecasting a contrary movement. Relying too much on the ability of professional financial managers is also a potentially bad thing. The movement in the stock market is mostly random, though some order can be found in such activity, but there is no way even the best of financial planners can correctly predict the movement in the stock market, and therefore it is best to rely on your own instincts especially if you have some good tools at your disposal.

With the financial markets becoming more complicated with each passing day, and the stock markets showing the extremes of volatility, investors are presented with the challenge that seems try to get in your way of your goal of making money in the stock market. It is important to remember that investment in stocks is as much a science as an art, and at times personal instincts work better than any scientific report telling you what direction to go.

It is important to know these issues before deciding to move forward with ?your plan to make money in the stock market, and if that is not possible, then these are the issues that you should use in a consultation.

People who invest in the stock market have been proven to make the same types of mistakes. ?The first mistake that is most commonly committed by most folks is that they do not invest with a plan of action. Any personal investment plan must address some important issues, for example what are the goals and objectives of the investment; what are the risks involved and what is your comfort level; what is the appropriate benchmark you should consider to measure the results of working your strategy; how should you allocate your resources withing the categories ofsecurities available in the market for investment, and in the end what kind of diversification do you want in each asset class that you’ve selected?

?The second most common mistake is only focusing on short-term goals. You need to understood that the higher than average returns in the short term also involve higher risk of higher than average losses.

The third most common mistake is neglecting to revisit and tweak your portfolio. Once you’ve made an investment, the market variables may change necessitating the portfolio to be rebalanced to the changed variables. It is also incorrect to chase some benchmark index giving abnormal returns during a timeframe, with the feeling that you’re missing out on getting the same results with the portfolio of someone else. It is best to judge the performance of your investments against the investment goals and objectives that you’ve outlined from the beginning. Getting an abnormal return also entails a higher than normal possibility of incurring higher than normal losses.?

Investing can be incredibly dangerous if you get right down and think about it. If you make just a few bad choices why, you can wipe out an entire lifetimes worth of careful savings and planning and endanger your entire retirement… heck you can even get yourself thrown out on the street.

Of course, this is only an extreme possibility, but it is a possibility nonetheless; which makes investing in the stock market an apprehensive undertaking for many individual investors, but it doesn’t have to be if you just follow these few simple steps to help you avoid some of the most common stock market investing mistakes.

The first mistake that most people make is to fail to diversify. If you just purchased a few stocks and spent all of your savings on those few stocks than the chances increase exponentially that you may lose your money. All it takes is one or two of those stocks to decrease in value and you can quickly lose tens of thousands of dollars or more.

If on the other hand, you had simply diversified into many different stocks then the fact that one or two stocks decreased would not be a life-threatening or retirement threatening situation. Diversifying allows you to watch dispassionately and notice the stocks that aren’t performing well, at which time you simply sell them and reinvest them into others that are performing well.

Not only is it a safety net in the fact that I just mentioned above, it also has mathematical properties that are beneficial as well. All stocks have an inherent market risk which means that if something happens to the market as a whole it will correlate and effect an individual stock as well. By purchasing many different stocks you spread that market risk out and in effect decrease the market risk, sometimes down to zero depending on how many different stocks you own and how correlated each of them are to the broad market.

Another mistake that many people make is poor record-keeping. How can you know which of your stocks are performing well and which of your stocks are tanking if you don’t keep good records? These days stock brokerage firms do a pretty good job of sending you reports, the problem is they don’t send those reports until after the month is over at the earliest, and sometimes they only send them out quarterly which is not soon enough for you to determine a poorly performing stock and sell it.

The last mistake I’ll discuss is what I call the guru syndrome. Many individual investors look for gurus; people they think of as experts in the field of stock market investing and then they tend to follow the advice of those gurus. This often ends up poorly because those gurus often have their own agenda that has little to do with offering you good advice. Stocks should be purchased based on sound financial analysis not on a hot tip from somebody you think of as an expert.

So there you have several mistakes that individual investors make that you can now be on the lookout for so that they don’t destroy your stock portfolio.

Now as an investor, many people look for value stocks while others look for growth stocks. Whatever type of stock you choose, at the end of the day, it is your trading or what you may call investing discipline that is going to determine how much you make with your investment. What you need to know is what stocks to buy, what stocks to sell and when to do that. For this you need a set of good investing or trading rules and the discipline in you to implement those rules in practice!

Do you dream of discovering a killer stock that will make you rich? Or you’re not sure of how many stocks you should have in your portfolio. Or you buy one stock after another as if you are a stamp collector. Or you buy a stock without knowning exactly when you are going to sell it.

Now these are fatal mistakes that most small investor habitually make. What you need is a set of investing rules that tell you exactly what type of stocks to buy, what type of stocks to sell and when to do that. Let’ discuss the three critical investing mistakes committed by most of the small investors!

#1 Fatal Mistake: Falling in love with a stock! I ask you a question why do you buy a stock. Simple to make money many would say. Right but in reality you buy a stock to sell it. It doesn’t matter whether you bought the right stock at the right time. What matters is did you sell that stock at the right time.

Now most of the investor when they buy a stock start loving it and can’t think bad about it. But your stock is just a piece of paper that doesn’t care about you or your retirement savings. Loving a stock is going to break your heart one day when you will discover that your love has not been returned.

You should not be married to the stock. What you need is to sell that stock when the time is right. What this means is that the moment you buy a stock, you need to have an exit strategy that tells you when you are going to sell that stock.

#2 Stock Investing Fatal Mistake: You think that stock fundamentals matter a lot! This is another fatal mistake that many investors make when they buy a stock with strong fundamentals. They think that strong fundamentals are going to make the share price climb up. But in actual reality, strong fundamentals have nothing to do with a stock price. What moves the stock prices up or down is its demand in the market. As simple as that!

#3 Stock Investing Fatal Mistake: You waste your time searching for an undiscovered stock that can make you rich! Now to tell you the truth there is no undiscovered stock in the market. Wall Street has got thousands upon thousands of highly paid market analyst that do exactly that search for undiscovered stocks. As a small investors, you can’t beat them. Because it is there job and they are paid to do it daily!

People have been trading stocks for hundreds of years. It is one of the best ways to ensure a financially sound future for you and your loved ones. With a good broker and some knowledge you can go a long way toward success in stock trading. However, you do need to be wary of making some of the common mistakes that can cost you money. Let’s review some of these mistakes in order to help you avoid them.

Probably the single most crucial mistake is postponing the start of your investing until you have ‘extra’ money. This can cost you millions because the value of money invested compounds across time in such a way that the same amount invested in your twenties can bring you literally double the earnings by age 65 as the same amount invested a mere ten years later. If you can’t afford to start with $250 a month or even $100 a month try to set aside $25 or so for steady monthly investing. Time really is money when you are talking about stock investing.

Another common mistake is not researching stocks adequately before buying them. All stocks are not created equal by any means. Take the time to thoroughly look into the history of the company you are interested in, its current state, future plans as they are known. How is the present leadership doing? What are recent trends in the relevant industry sector? And watch yourself carefully for the tendency to make investment decisions based on emotion rather than good, hard facts.

Always take the time to look into your options carefully. The same applies to choosing a broker or financial advisor. Don’t grab the first one you meet without doing research, considering alternatives and investigating the person’s investing philosophy and experience. Do ask for recommendations from friends and acquaintances, even family, but be sure you consider how qualified the person doing the recommending is to evaluate a financial professional.

Keep in mind at all times that investing in the stock market is not playing a game. Don’t gamble with your funds or your future. Remember that you are trying to build a solid financial foundation not “get rich quick.” You will hear of people who appear to make large profits from day trading for instance. Day trading is rapid trading in and out of stocks as their value rises and falls in the course of minutes or even hours. It ignores underlying value and concentrates solely on quick profit from market moves.

Some day traders can sometimes make great profits but overall day trading is a losing game for most people. Avoid the temptation to follow a day trading style. Also avoid the tendency to become fascinated with trendy stocks that everyone is pushing but which carry a huge risk for investors. Don’t try to gain by gambling. Rather, steadily invest money over time into good solid companies that are known for giving results year in and year out. Resist the impulse to listen to those who want to give you a “great lead” on a stock they think is “set to explode.”  Don’t try to shortcut the research and careful consideration that good investors need to do.

One more area to watch carefully is the diversification of your investments. Put money into a variety of companies and industries. This gives you protection against unexpected trouble with any one company. It also allows you to even out the ups and downs that afflict entire industry sectors from time to time. Research, diversified investments and balance are your best investing tools.