Be a better stock investor: 7 rules

For many successful investors, avoiding mistakes is as important as picking the right stock. These tips will help you stay focused on your investment goals.

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VIDEO ON MSN MONEY

10Comments
Mar 20, 2013 9:46AM
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Yet another completely useless article from MSN Money. 

 

Investing does not have to be complicated.  Start slow and learn as you go.  Do not punish yourself for mistakes, learn from them. 

 

Start by opening a Roth IRA at your bank or credit union.  Next if you have access to a 401k or 403b at your work start contributing money to it.  Pick you mutual funds by researching each mutual fund on Morningstar.com (yes I realize Morningstar is not perfect but it is a good starting point).  Ignore the Morningstar Star Rating system.  Look instead at the actual performance numbers.  You want mutual funds that are performing in the top 35% of the asset class.  You 401k / 403b will not have all great investment options but it should have a few winners.  Then use you IRA to buy mutual funds in the other asset classed not covered my your 401k / 403b. 

 

Remember your are investing for direction not perfection. 

Mar 19, 2013 11:22PM
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They left out the big easy one.   Invest in a broad base mutual fund following the Dow or S&P when the major indicators show a major retreat and sell when they go back up. None to very little research and immediate diversification into several large companies in a single go.  Following the market trend doesn't require a lot of divining the tea leaves of a company's prospectus (and their intentional omittance or obfuscation of relevant information).
Mar 24, 2013 5:16PM
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This is one of the few good articles on investing in a day when so many of them seem aimed at getting the investor to look only at short-term data.

But if you're new to investing in stocks themselves, note that short articles are not enough to give you a real long term edge.  There are other things not mentioned here like cash flow compared to earnings - which can tip you off if the company's earnings are being boosted by accounting tricks.  Or ROE (Return On Equity) whose higher or lower trends over time can tell you if the company is capable of putting increased earnings to good use.  Then there's the question of whether the company is a Rule Maker (a big solid Gorilla in its sector) or a Rule Breaker (an upstart that's doing something the other companies can't easily copy).  And is there a competitor that's grabbing a lot of market share?

The best thing to do is read at least one easy-to-understand stock market classic.  My recommendation is Mary Buffett's "Buffettology."  I skim over chapter 16's nine questions that determine if a company is truly great before every stock buy.  A really easy book that gives you a decent start in understanding how to judge stocks is Peter Lynch's classic "One Up On Wall Street."

Mar 24, 2013 1:44PM
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Here's the 8th rule -- ignore commentators like Cramer and Co and believe the Market will  grow.  It's embarrassing to see these people wonder about what will happen next.. If they have no opinion, why watch them on SQUAWK?
Mar 23, 2013 11:29PM
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Pick um up, shake um up, and roll the bones! Honestly, over the years I have found the best advise "a rising tide raises all boats". If you are a professional stock picker maybe you can find the sand bar when the tide is going out but you may also hit a jagged rock and sink. Buy the indexes when things are good and sell when they reverse. Yes you may get lucky but for most of us the stocking picking turns out to be little better than having money in a cookie jar. 
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