Good point. Goes to the basic underlying cause of people losing money in the market, IMHO.
It appears to me that most people are simply unwilling to learn about the stock market and how it works. Everything is fine as long as they think they understand a stock. GM makes cars. Fine, end of due diligence. But if something comes up that they don't understand (which it always does, nobody understands it all) they are then faced with a problem.
Either they stop and go to Stock Market School, or they relinquish control to someone else.
The "someone else" is who you are talking about. Many people look no farther than the last call in the market. A monkey has a 50% chance, statistically, of making a "Good Call" in the stock market (meaning the monkey says 'go long on ABCD right now' and the stock immediately goes up.)
Every book, tape, "guru", tip sheet, and tout has one common problem with "picking stocks". They don't know the person that is listening to them. Every investor is different, every person has different goals, different investment objectives, different risk tolerance, different amounts of money, different everything. No "system" works for different people in the same way, no "system" or "set of rules" will work for two different people in the same way.
There are general guidelines that can be followed to help most people reduce their risk; such as 'Don't buy an out of the money option on the day before it expires', or 'Never buy a stock that has a 20% spread'; stuff like that.
The fact that some people will believe almost anything is easily proven. For example, the recent "webnode.com" April Fool's Day prank generated (in 24 hours) over 1,000 e-mail requests for more information. Of these 1,000 e-mails, three mentioned that they saw it was a joke. This, in spite of the fact that the site was full of stuff that was obviously bogus. The FunPhone.com gag was even more obvious. I personally did not think that anyone would request information on the company, because if you go through the site, you cannot help but see it is a gag. Nevertheless, people did send e-mails, and some people were actually fooled.
Those were gags, but the real world is much more dark and sinister.
Criminals will prey on people who are greedy. This has been true since criminals were invented. The paid touts and scamsters know that most people don't do their homework, and they use it to their full advantage.
An unsophisticated investor will believe almost anyone if that person sounds like they know what they are talking about. That's why we have laws about this stuff. Prior to the Securities Act of 1933, the stock market was really, really interesting.
My point is simply this: either the investor makes a decision to go to work and do his homework and take responsibility for his own decisions, or he should buy mutual funds. Mutual Funds pay guys to do the work.
If the investor decides to go it by himself, he should do everything within his power to learn more, to learn more every day. The bad part of this is that if you screw up, you have nobody to blame but yourself.
This is one of the reasons that I like SI.
When the paid tout bastards and the scam company presidents and the rest of the scum that are trying their best to steal money from SI members just give up and go to the other Internet sites, cOUSIN SHORTY will throw a big party on the spacecraft, and you'll be invited. |
