Making money with stocks is a challenge, particularly
in the current uncertain market conditions. Now, you can't simply
buy a stock and assume that the bull market run with it. You must
make each buy and sell decision with care and insight. Anecdotal
investing doesn't work well in volatile markets.
Today's market conditions require that investors commit a considerable
amount time following the market, researching stocks, learning about
technical and fundamental analysis techniques and sorting through
the myriad of investing information.
If you're not willing to be a totally committed investor, perhaps
you should consider avoiding stocks altogether and simply stick
with cash. Being a casual investor is a recipe for losing money.
Here's a checklist to help you determine what to do. If you answer
no to any of the questions, you may want to avoid investing in stocks.
| Should
You Own Stocks? |
| Question |
Answer: Yes |
Answer: No |
Comments |
| Do you have a specific investment
goal and a plan to implement it? Can you write down your plan? |
Own stocks. |
Do not
own stocks. |
A general goal like "I
want to make money" is not sufficient. Be specific. For
instance, a legitimate goal would be, " I want to accumulate
$200,000 in 10 years and I will invest $5,000 each month for
10 years in large U.S. companies that pay dividends." |
| Can you avoid withdrawing money
from your portfolio? |
Own Stocks. |
Do not
own stocks. |
If you need to regularly withdraw
money from your portfolio for living expenses or other needs,
keep most of your money in cash, not stocks. |
| Do you know how to interpret
a price chart pattern? Would you learn to read price charts? |
Own stocks. |
Do not
own stocks. |
Is the stock on the upside
or downside. Is it making a price bubble? Is it at an all-time
low. Do you know the significance of a chart patterns? |
| Do you use technical analysis?
Would you learn the basics of technical analysis? |
Own stocks. |
Do not
own stocks. |
For instance, do you know how
moving averages work? |
| Would you follow the price of
your stocks at least once a week? |
Own stocks. |
Do not
own stocks. |
Monitor prices to discover
price trends. |
| Would you follow the news about
your stocks at least once a week? |
Own stocks. |
Do not
own stocks. |
Staying current lets you know
why a stock increases or decreases in price. |
| Do you know how to value a stock?
Would you learn how to value a stock? |
Own stocks. |
Do not
own stocks. |
Know the financial fundamentals
of a company. Can you understand a balance sheet? |
| Can you eliminate emotions from
your investing decisions? |
Own stocks. |
Do not
own stocks. |
Anger and depression cloud
sound buy, hold and sell decision making. |
| Can you admit when you make
an investing mistake? |
Own stocks. |
Do not
own stocks. |
Blaming others for unprofitable
investments doesn't let you learn from your mistakes. |
| Would you read and study at
least five classic books about investing? |
Own stocks. |
Do not
own stocks. |
Learn from the great investors.
Follow their money-making practices. |
| You do need to regularly withdraw
money from your portfolio? |
Own stocks. |
Do not
own stocks. |
If you need to regularly withdraw
money from your portfolio for living expenses or other needs,
keep most of your money in cash, not stocks. |
| Would you sell a stock for a
small loss to avert major losses? |
Own stocks. |
Do not
own stocks. |
Losses are part of investing.
Get used to them. Preserve money for the next investment. |
