I’m writing this article for my staff. It’s essentially for people who don’t know anything about the stock market.
Now, it’s not like I’m the worlds foremost expert on the stock market. It’s not my job.
What I’m trying to convey is my life experience in the stock market.
1. For the most part, stick to companies that you know and use. It’s your personal knowledge of these companies that will help you stay the course when the media is scaring everybody into not buying the stock. This has served me well over the years. Naturally,, you have to be realistic. You may like a company that truly no one else likes. You have to be very objective in evaluating that company. You can’t necessarily fall in love with it and then assume that everyone else loves it. Everyone else may not love it.
2. Stay away from the bond market if you can. It’s not that you can’t make good money on the bond market. It’s just that it’s more difficult to evaluate. It’s also dependent in large part on governments. Plus many times people are storing their money in the bond market because the stock market is flat.
3. Always look at the balance sheet and the income statement of the company in question. It’s not too difficult to do. The balance sheet for a company is similar to your own balance sheet for your personal life. How much money do you have in resources and how much money do you owe. The income statement for a company is similar to your personal income statement. How much money is coming in and how much money is going out.
4. Look at the current news items relevant to your company. Try to get familiar with what is being said about your company, and what the CEO and his officers have to say about your company. Don’t go too wild about what the CEO says though as he or she can not possibly be objective. Plus some of them flat out lie.
5. Look at the current price of the company. Is it down? Is it up? Generally, you win when you buy. You want to evaluate a company in the same way that you would evaluate an item that you would buy for your house. If you can pick up something that looks relatively cheap, so much the better.
6. Try to look for good deals in the stock market. These generally are stocks that have been unfairly devalued. There are always plenty of those out there.
7. If you’re not sure about a stock, buy only a couple of shares to get your feet wet. Don’t bet the ranch on something you’re not quite sure about.
8. Don’t buy stocks simply because the share price is low. Penny, stocks can go to zero. A low stock price doesn’t necessarily mean that the stock is better. It doesn’t mean that it’s worse either. All it signifies is the price of the stock. A highly priced stock can go up just as much as a low priced stock.
9. Don’t get too, caught up in the jargon and hype from business news shows. Many times their hype or negative hype will confuse you. Stick to what you know from your personal experience and what you read on the balance sheet and income statement.
10. Don’t diversify into things you don’t know anything about.
11. You shouldn’t always invest all of your available cash. Try to temper your greed when things look good and keep a certain amount in reserve just in case the market goes lower.
12. Invest for the long term. Do not be a day trader. Try not to be hopping in and out of market. Invest in stocks that you think will hang around for 20 or 30 years.
13. Stay away from options. Options are gambling.
14. If you’ve done your homework, and you are invested for the long term, you should be able to ride out a bear market.
15. Temper your enthusiasm in a bull market. Temper your fears in a bear market. Things are never as good or as bad as they seem to be.
16. Do not try to time the market. It cannot be done. You cannot predict the future, and no one else can.
17. Never short sell. When you are short selling, you are betting on a company to lose. There is no way to justify this. Trust me, I’ve spent countless hours, trying to justify short selling , and I never could. Plus, when you short sell, you open yourself up to unlimited risk.
18. Measure twice, cut once.
19. Don’t obsess on the day to day movements of the stock market. It will drive you crazy; it will take over your life.
20. You’ll never be able to predict whether news will make your stock go up or go down.
21. The stock market price is based upon the perceptions of hundreds of thousands of traders. There is no arguing with that.
22. Do not blow all your money on one stock. If you don’t like any other stocks, then don’t put all your money into that one stock.
23. Don’t be afraid to buy during a bear market. That’s where the low prices are.
That’s good enough for now.
Sincerely,
Archer Crosley
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