I’ve made millions of dollars trading stocks and I openly teach my secrets to 5,000-plus students in 60-plus countries, but some people are just scared of the stock market. Why? Little different from driving a car without any directions, road signs, lanes or stoplights, the stock market can be a scary place if you don’t know what you’re doing. So, let me provide you with some direction to make the markets less frightening.
Here are three tips:
Tip #1: Cutting losses limits your risk
Too many people invest in stocks based on “gut feelings” and “hot tips” and they follow that misguided thinking into the ground. I don’t believe in investing based on tips or gut instincts, but more importantly, if the stock goes against you and you force yourself to cut losses quickly before it ever has a chance to blow up in your face, you avert the risk of disaster every time.
The threat of large losses is the number one reason why people are scared of the stock market so take that possibility out of the equation by admitting to yourself that you could be wrong about any stock in which you invest. It’s perfectly fine to be wrong in the stock market, but it’s not okay to be wrong, do nothing about it and hope for a comeback, inevitably suffering a big loss.
Yes, I’ve made millions of dollars, but I also lose roughly 30% of the time. How am I still rich? Because I cut my losses quickly and my larger wins greatly outnumber my small losses.
Tip #2: Be a realist
Everyone loves the talking E*Trade baby in TV commercials and brokers make the stock market seem like a fun and safe place to grow your nest-egg. They won’t tell you that even in bull markets most stocks go down, 90-95% of traders lose consistently and that 70% of professional money managers fail to beat the most popular market indices year in year out.
Don’t trust talking babies on TV, they’re luring you into a sucker’s game. That’s not to say there aren’t winners, heck I’ve already created several millionaire students in just a few years of teaching, but you should know the odds are against you and without diligent study and proper expectations you set yourself up for disappointment.
Tip #3: Keep it simple, stupid:
There are all kinds of advanced theories, formulas, websites and software to predicting the stock market and most of it costs a lot of money. Rest assured it’s rubbish!
I’ve found that simple rules – such as buying small companies that break out to new highs when they have great earnings or when they announce they’re working with much bigger companies and betting against blatant scams that have inflated prices due to their luring in suckers – are the most effective way to getting rich in the stock market.
There are many snakeoil salesman who talk a big game, but they can’t back up their track record and they exist just to intimidate you and make you feel like you need them and their gimmicks. Trust me, you don’t.
Learn from successful traders and investors who do show their entire track records, those of us who enjoy teaching share freely on social media because we enjoy helping others succeed. No gimmicks just full transparency, that’s the future of finance.
Things I Liked:
1. Impersonator Frank Caliendo reading Lebron James’ Sports Illustrated article in Morgan Freeman’s voice.
2. The one upside from all these plane crashes is that airlines and pilots will work harder than ever to keep from being next, it’s a great time to fly!
3. It’s becoming common knowledge that the Clintons have raised $1 billion the past few years – I’m not political, but they are impressive duo.
Up and down:
The stock market continues hitting new highs with no clouds in sight. Be warned, markets don’t go up forever and August-October is a historically dangerous time.
Amazon reported more losses claiming they’re investing to make the customer user experience better. Facebook, Apple & Google invest too, but they’re all very profitable companies.