How to Invest in Stocks

Dec 9th, 2010No Comments

How to invest in stocks, how to invest your money and how to start investing is not where the process of investing begins. The process begins with a study of you and your motives.

If we were to ask why you invest, what’s your motivation, you would be forgiven for looking at us a little strangely. A knee-jerk response would probably be “to make money, of course, that’s why I want to know how to invest in stocks!” But bear with us: is that the whole truth and nothing but the truth?

Dig below the surface. Is making money your only reason, apart from the fact that most people don’t want money; they want what they can buy with it? It is not a trick question.

Family security rides on answer

The answer in the cold light of day seems so obvious the question sounds dumb…but is it really? The security of you and your family could be riding on the answer.

Let’s approach it from a different direction, assuming you do any of the following things: Do you buy lottery tickets with conviction you will win or do you do so for the pleasure of dreaming impossible dreams? Other than in a casino, do you play poker with the sole objective of increasing your wealth at your friends’ expense or because of the companionship?

We all have agendas that differ from what might appear obvious to someone from space. Perhaps we wouldn’t be human without them. Just think about this: lotteries are the only tax I can think of that some of us pay willingly. So what motives other than making money do you have? None? You win a gold star. Or is there a thrill element? A challenge? A desire to “beat the market?” You must know what type of investor you are if you are to keep out of trouble. Why do you want to know how to invest your money?

There are many legitimate reasons, but you need to know your own reasons and how you will cope with occasional setbacks.

Making money often not the motive

Surprisingly, making money is often not at the top of the list when people are honest with themselves. Are you a gambler who thrives on the thrills and potential spills of speculative investing? Are you at the other extreme: the sort of person who would never dream of stepping inside a casino? Are you an analytical type who is challenged to see how your conclusions gleaned from financial reports work out?

Or are you a plodder, satisfied to earn a small return on your money so long as you can do so with consistency? Or Mr. Cool, who pays little attention to what the overall market is doing once you have made your initial investment decision? Or do you simply rely on someone else to make financial decisions for you, your family and your future?

We are competitive animals

Humans are competitive animals. That’s how, as a species, we have advanced over the years. But competitiveness when it comes to investments can be a recipe for disaster. The overall market’s long-term average is about 10%. For most investors who are not highly organized to have average long-term returns much above 11 or 12 percent means taking above average risks to make up for the frequent losses.

‘Beating the market’ is easy when you know how but most investors have never stopped to learn the simple rules that would make this virtually automatic, rules you will learn here. If knowing how to invest your money is a quest for knowledge, congratulations! Many others see the market as a personal challenge because they believe that beating it is difficult. For that reason many feel they must try but they try with little or no knowledge.

Follow Wealthy Investor strategies faithfully and you will beat the market’s long-term average without even raising a sweat. That’s the promise of Wealthy Investor Weekly. What’s more, when you examine the system carefully, you will see you can do so with virtually no work and with a lot of confidence.

Beat the market

Over the long haul and with proper diversification your portfolio will beat the market average. What’s the long haul, I heard you ask. Most of the time, 10 years should do the trick. During a recent 12 year period the major indexes were actually down; you would have seen an entirely different and pleasing story in results achieved by Wealthy Investor.

Just remember the story of the hare and the tortoise. The tortoise plodded along steadily, not even pausing when he passed the sleeping hare, and he won the race.

There’s a parallel in investing. Sure, it’s exciting to double your money in a short period. But when it happens, recognize it has been by pure dumb and unforeseen luck. If it were possible to plan to double your money in 90 days, don’t you think that others would be in line long before you?

This is not to say that you should not try to pick the best investments; of course you should. But just make sure the companies are solid ones, fit the balance of your overall portfolio – and then spread your risk.

Resist urges, stick to rules

You’re competitive? No one can (or should) try to change that. Instead, we can put that competitiveness to good use by changing its focus. Instead of wondering how to invest in stocks we think will double next week, focus on how well we are able to stick to the simple rules of investing that are outlined in Wealthy Investor.

Measure your competitive successes or failures by how closely you can stick to those rules, and by how long you can maintain an unblemished non-deviating record. Don’t measure it by how well you avoid losses greater than the industry average, or by whatever clever coups you pull off. These abilities are truly what make for long-term success, and they will happen anyway.

Oh? You don’t like the phrase ‘long-term’? Sounds too boring? You’re in a hurry and want to make a killing fast? Then please take this most important piece of advice: avoid stocks altogether. Take a limited number of dollars and go to the races instead.

Proper investing has no thrills, spills

Investing properly according to my interpretation of that term is boring for people who enjoy thrills and spills, who want adventure in their lives. To my way of thinking, ‘proper’ investing means being aware of major news affecting your companies or their industries, then leaving them alone to work for you. Study the Wealthy Investor program carefully and you will see that more than eight in ten investments eventually work out well and that even with the occasional losses the overall rate of return is almost certainly better than you have ever experienced on a consistent basis.

Investing should be a process, not a job and certainly not an adventure. It is a business and the more mundane it seems the better. Be happy with your unusual return and get on with the rest of your life.

Not only will you far outstrip any mutual fund, you will also have the satisfaction of knowing your success is of your own making.

Do not fuss

That does not mean you should ignore your investments; just don’t fuss over them like a mother hen. Start doing that and the temptation to scratch away at them and to ‘adjust’ will result in difficulties for you.

Don’t try to compete with the market. Compete with yourself and on beating the tendency most of us have to try to “improve” upon rules.

That’s the best way to make money consistently with stock investments regardless of occasional bear markets.

How to invest in stocks, how to invest your money, how to start investing are questions that should be left until you answer a more important one: do you have an investor temperament?