Incoming Waves~! Get on the Right Boat!

I read this interesting story from a book  - 7 Commandments of Stock Investing by Gene Marcial.
It's quite a book with many examples, lessons and historical facts. I got it from the National Library. If you are out looking for it, it's probably borrowed...by me!

Well, the book taught me an analogy that I thought I should share.

The market is like tidal waves. Sometimes low, sometimes high. Stocks are like boats on the waves, they ride the waves up high as well.

here's the problem... Some boats have hidden HOLES. uh-oh. Imagine sitting on your boat, watching the rest of the boats going up and yours heading down. UH-OH.

Don't simply "follow the trend", do your homework. I can't emphasize more. Not that I'm in any position to "instruct" you to do it. But I learn there's just SO MANY things to look at just for ONE company. The P&L statements, the history of the company, the reputation of the company, the dividends they are paying out, their liabilities, their reserves, the list goes on.

Inspect your boat before going on it. You don't want to be on a submarine.

Courtesy of http://www.morningstaronline.co.uk/

Investment VS Gambling

I thought I had to free my mind on this matter. A friend of mine was telling me that day, "Matt, stocks are like gambling, you should stay away from it.". It bugged me for a while and I decided to take a closer look at this subject.

First let us start by looking at the meaning of both words.

Investment is defined as

Property or another possession acquired for future financial return or benefit.

To gamble is defined as

To stake or risk money, or anything of value, on the outcome of something involving chance

The word that should be of emphasis here is "Chance". Investment isn't a based on an outcome of something involving "Chance". When one invest in the company, he sincerely believe that the company has a strong prospect in the future. In his perception, this is how he views the company. Indeed his perception may be wrong, or any random act-of-God may pull down the firm, but at the point of investing, he believes in the firm.

On the contrary, gambling does not depend on any statistics or profile. Your returns are determined by a roll of the dice, or a flip of a card.

Everything in life is an investment, not just the stock market. Selecting a University to go to is an investment, buying a new laptop is an investment, even dating a girl you just met may be an investment!

Investment as a form of gambling
Am I contradicting myself here? Have I gone nuts? Not exactly. But many investors have turned investment to gambling. Instead of doing their "homework" and "read-ups", they purely look at stock price history and throw their money in the stock at its lowest point hoping that it may rise again due to the fluctuations of the market. They even buy and sell their shares on the same day and spend the whole day staring at the market.

Be a Gambler Investor!

• Read up on daily news and market trends
• Monitor one stock closely on a daily/weekly basis before diving straight into it.
• You should feel good about yourself after buying the stock because you believe in it!
• Read up on books and magazines to learn more about the stock market.
• Don't trade on emotion 

Courtesy of http://www.noluckneeded.com/