Play the Long Game

Don’t be a day trader.

Don’t try to figure out the stock market.

You can’t figure it out.

The only rule that seems to hold true is that the stock market goes up overtime.

If you try to time out the stock market in the short run on any stock or commodity, you run a greater risk of losing.

Forget about options. That’s pure casino gambling.

Don’t try to base your estimate of the stock market on what happens in the news either.

If interest rates go up, that doesn’t necessarily mean that the stock market will go down.

The market may decide that interest rates didn’t go up as much as they thought they would, which is good news to the market.

You can say the same for earnings.

If a company has bad earnings, you would expect the market to go down for that particular stock, however the market might say well, “We see the earnings as better than we thought they would be. We thought the earnings would be far worse. “

The market plays these games all the time.

For that reason, don’t pay attention to what the news says.

Don’t pay any attention to what the analysts say either.

Do your own research.

Look at the income statement and balance sheet yourself.

You should also be investing in stocks that you personally use.

Today, the New York Times was talking about a company called Albemarle which is a big lithium producer.

You would think that this would be a good buy because the stock is off its high to a good degree.

As I was looking at the stock today, I asked myself: What the hell do I know about lithium?

Do I purchase raw lithium?

Do I know anything about the customer service at Albemarle?

Am I a chemist?

Do I work in the energy sector?

Does raw lithium affect my core business?

The answer to all these questions is no. I’m a pediatrician.

For these reasons I have no context to believe in this company in bad times. I’m a babe in the woods.

For that reason I’m going to jettison Albemarle quicker than you say Joseph Priestly.

Now, Albemarle might be a good investment for Kent Masters, the CEO.

But not me.

I’m going to invest in companies I use, know and have confidence in.

But that doesn’t mean I’m going to bet the ranch. I’ll place a sizable chunk but hold at least 1/2 my allotment back in case the stock goes lower.

And when the stock goes lower, I will buy with confidence.

I still won’t bet everything though.

I’ll bet only the allotment I can afford to lose.

The goal is to play for the long run: decades.

You want to be one of those guys who everybody talks about. You want to be one of those guys who buys a stock in the early days.

The goal is to not sell your stock just because it goes up 75% or 100%.

What you want to do is keep that stock for decades so that it splits once, twice, thrice.

Play for the long run.

Pick stocks that you think will be around for 50 to 75 years.

For that reason you have to keep an eye out for stocks that YOU consider blue chips that you like and that you see other people liking.

These stocks have to have a little sex appeal.

Investors like sexy stocks just like they do sexy people.

I don’t get an erection over Albemarle. I might on Apple Computer.

If I buy and hold 2000 shares at $10 ($20,000)and it travels to 2000 shares at $100 ($200,000) then splits 4:1 back to 8000 shares at $25 ($200,000), I’m not going to sell.

I’m not going to sell because I’m going to be very reluctant to put $200,000 back into the market. I will say to myself: Oh no, that’s too much.

But if I leave it in, I won’t be thinking that I’m investing $200,000 because I only put in $20,000 to begin with.

Do you see the difference?

If I leave that $200,000 in play, when that stock rises another four fold, I’ve got myself $800,000.

At that point, I still won’t take it out. I’ll leave it in and wait for another four fold rise for a cool 3.2 million.

That’s how you are going to get wealthy.

The reason why people don’t do this is because they feel obligated to take the money out when the stock makes a little bit of gain. And they don’t wanna put the money back because they think it’s too much money to put back.

Or they get bored. Or they see somebody making a pile of money somewhere else. So they take it out.

Be one of the smarter ones. Buy and hold, and forget all the sexy day trading that will get you nowhere.

In summary, with daytrading you will never be able to time the market. You will never be able to outfigure the market.

Be a winner, not a chump.


Archer Crosley

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