Stock Investing For Dummies: Fearless Focus on the Trend

Stock Investing For Dummies

Stock Investing For Dummies: Disregard Fear and Focus on the Trend

Updated Nov 2023 

Every disaster is nothing but opportunity knocking in disguise. Most slam the door on it instead of embracing it with a warm hug. Sol Palha 

Never listen to the Media; we will discuss this further in the article. We want to address a request several readers put forth recently. They asked us to create a Stock Investing For Dummies guide, so here goes. At some point in the future, we will look into creating a Stock Investing For Dummies downloadable guide in PDF format, but this page will have to suffice for now.

We will cover some of the most common stock investment mistakes egregiously committed by novice investors and even, sometimes, by so-called professional investors. Novice market players confuse the term stock market trading with stock market investing. Then you have investors who confuse the term long-term investing with the concept of buy and hold; there is nothing one should buy and hold forever if you do so, the idea should be called buy and fold. This is probably one of the most common investment mistakes of all time. There is a time to buy, a time to hold, and then a time to fold.

Stock Investing For Dummies Rule No 2.

The Investor looks for a trend and buys early in the direction; he/she then rides the trend until it ends. One should learn the basics of trend analysis as it will help one determine when a new trend is about to start.  Now, let’s go back to the topic of Trading vs investing.

Stock market traders look for rapid, short-term gains; they prefer to extract the maximum profit from stock, options, future, etc. At least, that’s the concept behind trading. Unfortunately, most traders lose more than they win, and even when they do win, they usually make less than the long-term investor.

A few traders do exceptionally well; these chaps fall into the 2% category of overall players. Their gains are enormous, but for the rest of the players, a loss is all they can hope to look forward to. On the other hand, the investor looks for a new trend and usually tries to get in right at the beginning of the trend. If he/she is more aggressive, they try to get in when that particular market is putting in a bottom and has been trending sideways for some time, indicating that the worst is behind.

Stock Investing For Dummies Rule 3; Don’t confuse long Term with buy & hold

Another error often made is confusing long-term investing with the instead falsely promoted buy-and-hold policy. Long-term investing is getting in early and selling when the trend is over. A classic example was the Internet mania of the 1990s.

The time to buy was in 1995 and 1996, and the time to sell was in late 1999 and early 2000 when many Internet stocks started violating their main uptrend lines. Those that bought the buy-and-hold lie found themselves even poorer than when they took initial positions in these stocks.

A more recent example was the housing bust and mortgage crisis that rocked the financial sector and produced a massive crash.   The right time to get into housing was from 1999 to  2006.  Yes, the Market did overshoot, but buying after 2006 was not a brilliant idea.  From 2006 onwards, the intelligent player was selling into strength, such that by 2007 he virtually had no position in real estate.

Trend Analysis  & Mass Psychology

We advised our subscribers to bail out long before the housing market topped out.  The same holds true for the internet bubble. On the same token, we got our subscribers into the commodity bull well before the market exploded. For example, we closed out our Silver positions for over 1000% in gains and Gold and Palladium positions for gains of over 700%.

We only refer to Bullion gains, not the increases we locked in many stock positions. We have now come up with the most advanced tool we have ever developed, and this tool would have produced even more significant gains were we in a position to use it earlier.

 Stock Investing For Dummies Tip

A fundamental concept one should learn when one seeks to enter the Stock Market is the art of being a contrarian. In short, a contrarian investor does something opposite to what the crowd is doing.  The Tactical Investor has always been known for taking contrarian views based on Mass Psychology. In other words,  the emphasis is on Mass Psychology as emotions drive the markets.  Sometimes, even contrarians have a hard time digesting some of our views.

Stock Investing For Dummies Rule 4: Portfolio Management is key to success

Portfolio management separates the stock market winners from the stock market losers. It is one of the most important and neglected areas when it comes to investing. Many a trader or investor who could have otherwise been successful loses year after year.

These standard stock investment mistakes could cost you a fortune, so take a little time to ensure you have a plan. It could distinguish between hitting the home run or losing your home.

 

Coronavirus Pandemic Woes & Misinformation  (March 2020 Update)

Investing for dummies pdf and lies on the coronavirus Notice how mild it is for those who are under 50, but let’s assume it’s 1.3%. No data is provided on whether these individuals had any existing conditions. So far, they are using stats to manipulate the data to suit whatever outcome they want to project onto the masses. A more robust approach (which would be relatively easy) would entail listing any other conditions the patient might have had before becoming infected.

Furthermore, the overall death rate is relatively low when you look at the data from countries with sound health systems. Take a look at Japan, Germany, Denmark, South Korea, Switzerland, Singapore, Taiwan, etc.; the total death rate is well below 1.5 and, in many cases, below one per cent, and that’s accounting for all age groups.  For example, Singapore has zero deaths, Taiwan only has one, and so on.

 The Media’s Sole Function Is To Lie

The media often presents theories without providing all the necessary data, and if you closely read the articles, you’ll notice that experts use words like “may,” “could,” and “might.” However, the general public tends to treat these opinions as facts.

If you try searching for the question “Is the Coronavirus from the same family as the flu virus?” on Google, you won’t find direct answers among the top 10 search results. Instead, you’ll find numerous articles emphasizing the dangerous nature of the new variant of the Coronavirus. These articles might have been pushed down to lower pages over time, where they received less attention. The answer is quite simple: Coronavirus is from the same family as the flu but is more aggressive.

The Misleading Search Results: Unveiling the Impact of Media Influence

Despite going through six pages of search results on Google, it was challenging to find a straightforward answer explicitly addressing the relationship between the coronavirus and influenza. I used an alternative search engine, duckduckgo.com, to find relevant information on the first page. However, even in that article, I had to scroll down to discover the following information:

According to the CDC, human coronaviruses are widespread worldwide, and there are seven known types, many of which cause common colds. However, two recent types, MERS-CoV and SARS-CoV, are associated with severe illnesses, as explained by Dr. Amesh A. Adalja, an infectious disease expert and senior scholar at the Johns Hopkins Center for Health Security.     prevention.com

So why can’t the most popular search engine provide an article in the top 10 results that will answer the question directly? The answer is due to high-ranking media sites pushing an enormous amount of opinion-based articles that have replaced articles from lower-ranking sites that would have answered the question. Most individuals will not sift through data pages looking for the answer; they stop at the first page and usually look at the top results.

Stock Market Outlook  March 2020

Before this pandemic hit, we stated that central bankers, especially the Fed, were trying to take rates towards zero. Imagine how people would have reacted if the Fed had lowered interest rates by 150 bases two weeks ago.  When the Fed cut rates before the coronavirus attack, experts were quick to label them as being reckless, but now, after a 150 basis point cut, they say more has to be done. Notice the ploy here; to do what the masses hate, one has to create a situation that distracts their attention. Then, offer a solution three times as damaging as the previous one, and in their desperation to seek safety, they will agree to whatever course of action is laid out.

The system will be flooded with so much liquidity that the markets will melt upward when the media reports the data more accurately.  Right now, they talk about the mortality rate without breaking the data down and informing the masses that older individuals are the ones who fall into the high-risk category. Even then, most of them appear to have some other complications already.

Zero Rates Will Fuel The Next Stock Bubble 

What are the consequences when interest rates are close to zero and the Federal Reserve increases the amount of money in circulation? As rates encourage people to seek higher profits, there is an anticipated significant rise in speculative investments. Investing in stocks that pay dividends will result in a substantial influx of funds entering the markets in the upcoming years.

It is important to consider the considerable sum of money that has already been introduced into the market, as the Federal Reserve has committed to injecting $2 trillion, and an additional $800 billion is being requested by Trump. On Thursday, March 12, in response to the uncertainty brought about by the coronavirus pandemic, the Federal Reserve took additional steps by injecting $1.5 trillion into the markets to stabilize the economy.  straitstimes

Unveiling Opportunities Amidst Pandemic-induced Hysteria in the Market

Would any of this be possible before the coronavirus pandemic? This hysteria was most likely created to provide the perfect backdrop where the Fed could inject as much as it wanted into the markets and drop rates to zero. This ultra-low rate environment will trigger share buyback programs of the likes we have never seen before.

Return to any bubble or market top, and always one element is present. The masses were in a state of ecstasy before the market plunged; even the tulip mania, where the mass media element was missing, ended on a note of euphoria. Without going further, we have to agree with some of the emails from subscribers who are long-term investors stating that this is a generational buying opportunity. The current sell-off in the markets is based on all suppositions and presumptions. This hysteria-based selling is creating a once-in-a-lifetime opportunity for the astute investor.

Father Of All Opportunities

We will finish tabulating all the results of the sentiment data tomorrow and send another update within 48 hours of gathering the data.

The 1987 crash and 2008 crash fell into the “mother of all buying opportunities” category, but we could get a setup that could blow these setups and create the “father of all opportunities“. Such an event is so rare that it might occur only once during an individual’s lifetime. In the short term, there is no denying the landscape looks like a massacre, but if one is going to focus solely on the short timelines, then the odds of banking huge profits are pretty slim.

 The Imminent Market Shift: From Panic to Feeding Frenzy

Just 15 days ago, everyone would have begged for such prices, but 15 days later, everyone is ready to throw the towel in.  The volatility is likely to continue until the end of the month, especially since V readings soared by a whopping 650 points to an all-time high. Again, think about it: when was the last time the Fed dropped rates by 150 basis points in two weeks?  This is a massive development, but the current hysteria overshadows it. As stated before, companies will go ballistic with their share buyback programs.

When the panic subsides, it will create a feeding frenzy of the likes we have never seen before.  When you combine zero rates, two trillion dollar injections by the Feds and several more billion-dollar packages designed to stimulate the economy, the result will be a market melting upwards. The markets will be driven to unimaginable heights by today’s standards. Zero rates will also force many individuals on a fixed income to speculate, and these guys have a lot of cash sitting on the sidelines.

The Crowd is in a state of disarray.

Stock Investing For Dummies. The crowd is scared

The masses are bullish and downright hysterical, and history has clearly illustrated that the best time to buy is when the crowd is in disarray. We are on the cusp of a generational buying opportunity; those who fail to act will live to regret this mistake for decades to come.

Concluding Points:

1. Disregard fear and focus on the trend in stock investing.
2. The current market conditions provide a generational buying opportunity.
3. The coronavirus pandemic created an environment for the Federal Reserve to inject liquidity and lower interest rates to zero.
4. Share buyback programs triggered by the ultra-low rate environment will be unprecedented.
5. Historical market patterns show that market tops are often preceded by a state of ecstasy among the masses.
6. Astute investors recognize the once-in-a-lifetime opportunity created by the current hysteria-based selling.
7. Embracing contrarian views and utilizing trend analysis can lead to successful stock investing.
8. Portfolio management is crucial for long-term success in the stock market.

In summary, the coronavirus pandemic and the resulting market conditions have set the stage for a unique opportunity for stock investors. By disregarding fear, focusing on the trend, and applying contrarian strategies, investors can capitalize on the generational buying opportunity presented by the current market sell-off.

Elevate Your Stock Market Performance

A successful investment strategy involves a powerful blend of mass psychology and technical analysis when investing. By understanding the crowd behaviour of market participants, one gains valuable insights into the market’s pulse. Market psychology plays a pivotal role in identifying trends; the rest becomes relatively straightforward once these trends are identified. Additionally, incorporating the fundamental principles of contrarian investing can elevate your trading skills, especially when combined with the crowd’s wisdom and technical analysis.

Lastly, maintaining a comprehensive trading journal is invaluable in gaining insights into your mindset and crafting a robust battle plan to confront any challenges.

 

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