Stock Investing For Dummies Rule No.1
Never listen to the Media and we will talk about this in more detail further in the article. We would like 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 look into creating Stock Investing For Dummies downloadable guide in PDF format, but for now, this page will have to suffice. For those that can’t wait, then all you have to do is enter this URL and then press enter and create your own Stock Investing For Dummies downloadable guide
We are going to cover some of the most common stock investment mistakes that are egregiously committed by the novice investor, and even at times by the so-called professional investor. 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 concept 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, there is a time to hold, and then there is a time to fold.
Stock Investing For Dummies Rule No 2. Focus On The Trend
The Investor looks for a trend and buys early in the trend; 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 they can from stock, option, future, etc. At least that’s the concept behind trading. Unfortunately, most traders end up losing more than they win, and even when they do win, they usually end up making less than the long-term investor.
A few traders do extremely well; these chaps fall into the 2% category of overall players. Their gains are huge, but for the rest of the players, a loss is all the can hope to look forward to. The investor, on the other hand, 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 that is often made is to confuse long-term investing with the rather falsely promoted policy of buy and hold 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 late 1999 and early 2000 when many of the 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 simply not a smart idea. From 2006 onwards, the smart player was selling into strength, such that by 2007 he virtually had no position in real estate.
Trend Analysis & mass psychology Help Keep You On The Right Side Of The Markets
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 started to explode. For example, we closed out our Silver positions for over 1000% in gains and Gold and Palladium positions for gains in excess of 700%.
We are only referring to Bullion gains and not the gains we locked in many of our stock positions. We have now come up with the most advanced tool we have ever developed and this tool would have produced even larger gains, were we in a position to use it earlier. This tool is so effective that since its inception it has an accuracy of over 95%. For more information click here Trend Indicator.
Contrarian Investing Essential Part of Stock Investing for beginners PlayBook
A very important 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 that is totally the opposite of what the crowd is doing. The Tactical Investor has always been known for taking contrarian views that are 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 winner from the stock market losers. It is one of the most important and most neglected areas when it comes to investing. Many a trader or investor who could have otherwise been successful ends up losing year after year.
These common stock investment mistakes could cost you a fortune, so take a little time out to make sure that you have a plan in place. It could make the difference between hitting the home run or losing your home.
Coronavirus Pandemic woes & Misinformation (March 2020 Update)
Furthermore, when you look at the data from countries that have sound health systems in place, the overall death rate is quite low. 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 so far as has zero deaths, Taiwan only has one, and so on.
Stock Investing for Dummies Rule 5. The Media’s Sole Function Is To Lie
The media is pushing theories without all the data, and if you read almost all the stories you will see experts using words, such as may, could, might, but the masses treat these opinions as facts. Try to google the term “is the Coronavirus from the same family as the flu virus: “You won’t find any articles that answer the question directly in the top 10 search results. Instead, you will find a plethora of articles that go on describe how dangerous the new variant of the Coronavirus is. These articles were there before, but now they have been pushed to the bottom pages where no one bothers to look at.
The answer is simple, yes, it’s from the same family, but it’s a more virulent version. After going through six pages of results, I could barely find a straight answer on Google that discussed only the Coronavirus as it relates to influenza. I had to use duckduckgo.com and only then was I able to find something of value on the first page, but after scrolling down the article in question was I able to find the following info:
Human coronavirus is pretty common throughout the world, according to the CDC. There are seven different types that scientists know of, and many of them cause colds, says infectious disease expert Amesh A. Adalja, M.D., senior scholar at the Johns Hopkins Center for Health Security. However, two newer types—MERS-CoV and SARS-CoV—can cause severe illness. http://bit.ly/2UeuVL5
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 are not going to sift through pages of data looking for the answer; they stop at the first page and usually look at the top results.
Stock Market Outlook March 2020
Long before this pandemic hit, we stated that central bankers, especially the Fed, was on a mission to take rates towards zero. Imagine if the Fed had lowered interest rates by 150 bases two weeks ago, how people would have reacted. 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 that which the masses abhor, one has to create a situation that distracts their attention. Then offer a solution that is 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 is going to be flooded with so much liquidity that the markets will melt upwards when the media starts to report 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 that 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
Now with rates at close to zero and the Fed throwing money at this market like there is no tomorrow, what will happen? The first thing is that a vast swath of the population will be forced to speculate in their quest for higher returns. So even if they jump into stocks that only pay dividends, a massive hoard of money is set to hit the markets in the years to come. Look at how much money has already been thrown into this market. The Fed has agreed to inject 2 trillion into the markets and Trump is now asking for an additional 800 billion.
The Federal Reserve on Thursday (March 12) massively increased its efforts to keep the economy on track and quell the growing uncertainty caused by the coronavirus pandemic, injecting US$1.5 trillion (S$2 trillion) of cash into markets this week. http://bit.ly/3d7gS2E
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, in addition to dropping rates to zero. This ultra-low rate environment is going to trigger share buyback programs of the likes we have never seen before.
Go back to any bubble or market top, and there is always one element 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 that 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.
We will finish tabulating all the results of the sentiment data tomorrow and send another update out within 48 hours of gathering the data.
The 1987 crash and 2008 crash fell into the category of the “mother of all buying opportunities“, 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 individuals 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 quite slim.
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 its overshadowed by the current hysteria. As we stated before, companies are going to 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 injection by the Feds and several more billion-dollar packages designed to stimulate the economy, the result is going to be a market melting upwards. The markets will be driven to heights that are unimaginable by today’s standards. Zero rates are also going to force a large portion of 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
The masses are from bullish, in fact, they are downright hysterical and history has clearly illustrated that the best time to buy is when the crowd is in a state of disarray. We are on the cusp of a generational buying opportunity, those that fail to act will live to regret this mistake for decades to come.
Other Articles of Interest
Stock Trends & The Corona Virus Factor (March 14)
Trading The Markets & Investor Sentiment (March 3)
Stock Market Bull 2019 & Forever QE (June 13)