STOCK INVESTING TIPS

These investment approaches can assist you in successfully navigating the stock market.

1) Invest only for the long term. Think in terms of years rather than weeks or days. Day trading is for losers, and almost all day traders lose money. The winning stories are infrequent and not reproducible. The same is true for short-term investing, say a week or two. If you plan a vacation next month and think of investing for two weeks to make money for the vacation trip, that’s the wrong approach. Again, it may even work but cannot be reproduced if needed.

2) Stock market moves are predominantly random and not predictable. Even if you see a company price going mainly up for the whole year, the price is still random. It is possible to verify that. It means that any algorithmic approach to trading is very likely to fail because it is impossible to know what the stock will do tomorrow. Don’t even try trading bots. People who sell trading software make money, not people who use it.

3) Pick several good companies or at least those that appear promising. This is not the same. Good companies can go bad quickly, in days, or even faster. You have to pay close attention.

4) Do not pick a single company or a relatively few companies. This approach may seem attractive, but your money is gone if the company goes bad and you miss that. Some people do not like diversification, but it lets you sleep better at night. The theoretically minimum number of stocks to pick is about seven. Our recommendation is about ten. You must follow your stocks very closely, at least once daily. Read information about bought companies very often. Make links to business news in a web browser and check them often. Picking a large number of stocks makes it impossible to track them and almost guarantees that you will overlook some good companies. If you want to invest in many companies, buy mutual funds or ETFs. They offer slightly better safety and almost guarantee a mediocre return. Index funds may be slightly better, but not much.

5) Avoid buying stocks below $10, even if they appear appealing and promising. These companies have yet to succeed, and their value to become apparent over time. Instead, let others take on the risk.

6) The stock price should not be a decisive factor when buying stocks. A stock valued at $10 is not inherently a good deal, just as a stock valued at $1250 is not expensive. Remember that the price should not affect your decision to buy.

7 ) Determine in advance when you plan to sell stocks. Based on your risk tolerance, you might sell if the stock falls by 10% or 25% from its highest price. You might even wait for a 30-50% decline if inclined towards high-risk investing. Avoid becoming too attached to a stock. If the price decreases, sell it regardless. If it's your favorite company but is underperforming, replace it with another strong company in your portfolio.

8) Don’t ever short stocks. It’s a loser’s game.

9) Refrain from purchasing on margin. While occasionally appealing, the expenses are significant and might reduce your profits.

10) What about Bitcoin? It's about to reach $100000. If you invested a small amount ten years ago, it would be worth tens of millions today or even more. Of course, if you sold on the dip, you would have lost most of the money. It’s a vast subject, so decide on your own. The main problem is that no companies have backed up Bitcoin. Leave mining to real miners; stay away from cryptocurrencies.

11) Market Watch provides a quick look at stock market performance. Similar sites are available on the web.

12) We will not discuss 401k, IRA, or Roth IRA accounts. However, you should remember that some of them are very attractive.

13) Stick mostly with stocks, maybe add some bonds, and leave option trading and other financial instruments to others.

14) There are several good stock brokers; pick the one that looks best to you.

15) Holding stocks for more than a year offers tax benefits. Hold on to the stock for as long as possible if it does well. You won't incur any fees or taxes on it.

16) Steer clear of AI-driven stock buying or AI-managed portfolio adjustments. The time for AI in this field hasn't arrived, and it may never come. By researching companies on your own, you can make more informed decisions. However, remember that company annual reports often present an overly optimistic perspective.

17) What is the deal with high-frequency trading (HFT)? You can find more information here: HFT. It's important to investigate it independently. It appears to challenge all our beliefs about purchasing stocks and holding them indefinitely. It certainly does.

This is a summary of what to do in stock investing. If the economy is going up, you will be making money. If the economy is going down, you will be losing money. This isn't easy to turn around.

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