Stock and Mutual Fund Investing Strategies for Beginners

January 29th 2006

Follow the numbers

I remember my uncle once told me he relied on some “pros” to handle his investments. At that time I thought it was a mistake but I was too young to understand why. Almost all of he experts I listen to today say this is mistake.

This is the primary reason why most investors fail. This includes nearly all full-service brokers who charge commissions. Even the ones that handle actively managed mutual funds should be avoided. There could be a conflict of interest between the managers who run the funds and the shareholders who own them.

The primary purpose of “financial services” is to pull your money from your wallet. There is heavy emphasis on marketing and the cost structure benefits the managers, not you.

There are some investment tactics you might want to employ, rather than allowing the “pros” to suck you dry. Look for breakthrough products. Go beyond the history and expert analysis to find out who is really running the company and their direction. Many top investors prefer buying leaders in the industry.

Buy low and sell high; that is if you want to sell. Warren Buffet once made a comment about buying and selling. The sheer act of trading can suck your profits dry. Market timing is incredibly important. Learn to spot undervalued stocks.

Avoid the panic. I have had friends that bought stocks and immediately sold them when they declined, only to see them rise shortly after they got out. It seems like they habitually do this. I like to call this the panic syndrome.

Study your options. Pick some stocks and begin watching them daily. There are many online sites that are set up for watching portfolios. Take advantage of it and don’t give the “pros” all of your money.