thanks to QCOM marginmike retired young
tekboy, that was an excellent post by marginmike, thanks for pointing us to it. You know, his post alludes to something fundamental about the stock market that is sometimes overlooked. Simply this: It is very difficult to make money.
Too many people think the stock market is like some sort of cash machine, and that all you have to do is join the crowd and you will profit. If it was easy, just about everybody would be rich, and that is not the case. Any of the studies analyzing day traders bear this out. The statistics are awful, usually showing that 85% lose money, and another 10% make far less than they would in most day jobs. Yet many of these people are quite intelligent and they watch the market all day long, and many are well versed in the issue, reading press releases, chat sessions, etc. Tick by tick, day by day sweating the details does not work. It is like intensely watching the waves break for 10 minutes to determine which way the tide is going. Walk away, come back in four hours and the trend will be clear. Unfortunately, it takes more than a few hours or a few days to see the underlying trends in technology and how they effect the companies we invest in.
It takes hard work to make money. It takes research, it takes thought and it takes patience. It requires a strength of convictions, but it also requires knowing when you are wrong. That makes it very difficult.
In many cases there is a similar formula that unfolds before big gains are realized:
1. You need to find a superior company.
2. You need the market to over-react to negative information, preferably information with little real dollar substance.
3. You need to accumulate that stock.
4. You need to hold that stock.
Each of those steps is more difficult than the one before it.
If you wanted to lose as much money as possible, that would be easy. Just buy after the enthusiasm becomes deafening and sell when the pessimism runs rampant. Doing the opposite is difficult, very very difficult. |
