Investing 102

[GregWeld]

A couple of thoughts about the article....


Investing is a way of life... Using some criteria to pick what to invest in is something everyone must do, otherwise how could anyone make any decision to buy or sell. You must have some reason for the decision.

What I have found over the last 30 years of making these choices is that it's very easy to "justify" the purchase.... and it's very easy to be "scared out" of that decision (price drops - market drops - or some other hiccup)...

It's my belief that generally I've lost money when I've bought something I didn't really believe in --- and or --- used money that I needed for something else.

So - let's take FaceBook for an example.... "Everyone" bought the hype and the froth... and then when the shares didn't do as "expected" --- they were dumped. That's an investment trap that happens a lot and that everyone needs to be aware of. So then what happens is you were burned by "expectations" and now are wary of the next "big thing" and miss out on the shares that DO go up 100% on the first day. It's why I've just decided to steer clear of this kind of stuff. It becomes too emotional.

That is why I say that for Investing 102 -- that you simply choose stocks of companies that you like and know and understand their business. It's just a simple "criteria" that you can live with. Then you look for your investments to be somewhat diversified.

Investing only gets complicated when you start to build your portfolio and begin to have some "real" money working. What I mean by that is that once you get about 50 or 100 grand invested... and you have your 20 names.... and now you're trying to "reach" a bit. Reaching for more yield - reaching for more diversification - reaching to catch that next Google etc. But my feeling about that is that you should have an EXCELLENT base of investments and you should have a relatively good understanding of YOURSELF and what your reactions and expectations are by the time you've built your portfolio to this point. It's funny that the more money you have in the market - the less "afraid" you become. When you're starting out with $2500 -- you're almost paralyzed by the thought of investing it. That's when you need to have a criteria that is comfortable more than anything else.