You want to know how to make money in this market?? Here's how you do it.
Throw it in and leave it in.
Most folks have jobs that keep them busy enough that they don't have time to sit around and watch their investments all day long. Most times, they are the ones with the best stories..
It's really very simple....every time you have a little extra cash...rather than going out and buying a new car, new boat, new deck for the back of your house, etc... you put the money in a company that you think has a good story. Eventually, you will hit 1 or 2 that will make all your failures obsolete. This takes research of course...which I like to think most here are well capable of doing. Here's a little example, formula..whatever you want to call it....
Let's say you are throwing in $1,000 bucks at a time....for the poor folk <gg>
year 1
buy abc...1,000 shares at 1
buy bcd...100 shares at 10
buy cde...10 shares at 100
buy def...100 shares at 10
(ok, now you have invested 4k, or 1k per qrtr)
let's just stop there, since you probably get the point by now....but you do this for years, over and over and over again, always trying, always looking for that one company destined for greatness, sometimes adding to your best ones when that is your single best idea. Never, ever average down, but never ever sell either. If you buy a stock below your initial purchase, then you probably picked the wrong stock, or you just plain didn't value it properly and you shouldn't have bought it in the first place. (never add to a stock that is underperforming in other words)
Now let's look out just 3 years..and only think about those first 4 stocks...even though, you would have stockpiled at least 12 investments by this time.
Let's see how they have performed...not one of them cost you more than $1,000 remember.
abc...1,000 shares at 1
(Well, the company hasn't done much, the stock is trading at 50 cents now, but the prospects aren't looking so rosey for the company. Turns out, the software they were making wasn't such a big sell afterall, and they are just about broke...oh well, maybe they will try something new)
bcd...100 shares at 10
well.. you scored!!! The company is trading at 50 bucks a share...what's the beauty?? It has split 3 times for you. The company has executed...brilliant idea they had...and you discovered it. Hot dog!! You own 800 shares and the stock is trading at 50.....$40,000 yeehaaa!!!! (not to mention, you probably added to it several times, since you knew it was performing well....so it's likely that the 40k....is much more)
cde...10 shares at 100
What a stupid idea those crims sold you...the CEO sold a bunch of stock, bled the company dry on a pipe dream and ran off to the Carribean to avoid the SEC....with your money. Company filed bankruptcy and you lost it all....all $1,000....damn!! Do you care? Nah
def....100 shares at 10
Hey..not bad...nothing to shake a stick at anyway, the company is doing pretty good, had a few setbacks, the stock traded as low as 4 at one time, since they warned on earnings and got whipped, but they straightened it out and now the stock is at 60..sales are booming and the reason you bought it is starting to come to fruition..can't complain about that. But you never added to it, so it's worth 6k.
So....you are sitting on a total loss, a loser, a decent return, and a HUGE score. Yep, you lost 1,500 bucks....on those 2 losers...damn crims got ya! But wait...look at the actual return..
you are...
-1000
-500
+5000
+39,000
Total profits......$42,500....on 4k invested!!! Do you care about those 2 flops? Nope. You are up over 1,000%, you have never had to include these investments on your income taxes, and that company that gave you the big score...hell, their just getting started...the future is bright, and they are still trading at a reasonable valuation. You still don't sell.
The other one...that was worth 6k...well, you did a little research and you found that something doesn't jive with their accounting....so you take your profits, and you look elsewhere for a place to put it after paying the taxes.
You do this long enough, and invest as wisely as you possibly can, and sooner or later, you will score...several times.
Some folks have more disposable income than others to do this with...and some have less. You invest within your means, invest in things you beleive in, and don't look at it every day. Just forget about it. If you are trying to flip your whole wad all the time, yes, you will probably get fried eventually. Invest only what you can afford to lose.
And that's how you make money in this market.
The End
Oh, by the way,,,while you are doing all of this....you actually get to live your life too....what a bonus!!! |
