Since the stock market is falling, I thought it would be a good idea to give you some rules in the stock market.
These are some lessons that I have learned over 35 years. I list them not necessarily in order of importance.
- Invest in what you use and believe in if you think the price is good. When you use a product, you generally have a better feel for the product’s true value. This comes in handy when stock market gurus tell you to sell the stock. This helped me tremendously in the 80s with Apple computer and in 2008 with Las Vegas Sands.
- Stay away from options. It’s gambling pure and simple. Any gains I made in the regular stock market I lost in options. Particularly stay away from put options. When you buy a put option you’re betting on the stock to fail; and no matter how fiercely you try to justify the bet, you’ll feel bad – unless of course you work at Goldman Sachs or JP Morgan in which case you’ll feel happy. People there stamp their feet, sing the Horst Wessel song and scream, “Das tut mir leid.”
- Investing in bonds is like dating someone you think is a dog. You’ll trade that dog in the second a sexy stock comes along. So will everyone else; and if they dump their dog before you do, you’re fucked. I never invested in bonds. I never understood them, and I don’t think anyone else does either – which is why they dump them. Plus who wants to rely on the government?
- No one can predict the future. Case closed. What you can do is invest in good, undervalued stocks that appreciate.
- If you think that cheap stocks can’t go down any further, you are wrong.
- They call it a bear market for a reason. If you don’t know why, you’re going to find out.
- Just because you use and believe in a stock does not mean that you should hold on to the stock forever. You must be emotionally detached from your stock. Your job is to make wise decisions.
- Experts are not experts.
- CEOs are not experts. In fact many are active dissemblers of the truth.
- I don’t like diversification. I made more money not by diversifying but by carefully researching the balance sheets and income statements of the companies I was investing in. Plus I listened to conference calls when available.
- Try to hang onto your winners. Over decades you’ll do well. Resist the temptation to cash out to pay down on other assets.
- What goes down must not necessarily come back up. No, Sir, that ball can keep going down and down and …
- Not obeying these rules made the stock market a giant waste of time for me economically. I came out even.
- It’s s fun game, and you will have multiple opportunities to win and lose. Plus you will learn about the wider economy.
- Never think you are somebody or the Market Gods will happily show you where you stand in the grand scope of things.