As an investor,Stock Investment Philosophy is one of the most important decisions you’ll have to make. Here are two things you want to look for before you invest stock.
1. Buy Low – Sell High
Is there any way you can protect yourself from this nonsense? Yes! It is called a stop-loss order. Brokers don’t like them because then they have to watch your account. He will tell you you don’t need it as he will watch your account. And pigs can fly. The average broker has 300 accounts and unless you have a large 6-figure account you will be on the bottom of the pile.
Anyone can place a protective open stop-loss order for stocks. Most are about 8% to 15% below the highest closing price. I recommend that each Saturday morning you look in the paper for the Friday closing price of your stock and place your open stop each Monday morning with the broker. As your stock moves up keep raising the stop and you will sell near the high. Never lower it. This will lock in your profit or take you out of a losing position. I can assure you your broker will never call you to sell. Brokers are not taught to protect your capital.
2.Buy and Hold
Wall Street has been preaching the doctrine of Buy and Hold forever. The worst part about it is the small investor (and some big ones) actually believe it. Brokers and financial planners believe it, but when you show them they can get a better return by timing the market they just say, “It can’t be done”. They are either lazy or stupid.
When you have a loss the standard reply is, “Don’t worry. You are in for the long haul. The market always comes back”. In your lifetime? Today there are hundreds of stocks that have lost 50% to 90% of their value and there is absolutely no hope they will ever recover those losses. But….you are in for the long haul. You now have the Buy and Hold philosophy.