Dumb Money

Many people have, at one time or another, taken some of their hard-earned funds, and decided to put them in the stock market. These well-meaning individuals either acted on a tip they saw on CNBC, or actually believed one of those crazy faxes/emails that said XBXB @ $0.17/share was the next Microsoft. These people thought they were being smart, but they probably just ended up lining the pockets of brokers and mutual funds when they lost money on their 'investment'. I know, because I've done it, too.

Part of the problem we face is that we are big underdogs in the investment channel. We, as individuals, have access to hordes of information. Yet, we don't even scratch the surface of our knowledge potential. We invest without carefully reading financial statements and company reports, looking instead to message boards and TV stock 'experts' for guidance. If you own mutual funds, do you know what companies those funds are holding? Most people have no clue.

Investors can be lumped into two categories: smart money and dumb money. Most individuals are 'dumb money'. Smart money regularly beats the market, and includes many mutual funds. Dumb money generally loses. Dumb money often over-reacts to market pressure.

There are a few ways to avoid becoming 'dumb money'...

First, forget about short-term investing. If you plan to rapidly buy & sell stocks, statistics show that, on average, you will lose, and maybe lose big. Long-term investors don't easily get scared off by market fluctations, 10% price swings, or a bad earnings report. Plus, they don't have to pay the transaction fees over and over like the day traders do. The best way to ensure that you will make money investing is to find your initial investment vehicle, and leave your money alone.

Second, don't go along with the crowd. Example: Walmart's stock has been a great investment over the last 5 years, right? Wrong! It's actually lost about 5% during that time. Yet, if you watched CNBC, you'd swear that Walmart was the best thing since sliced bread. Find a strategy that makes fundamental good-sense, and don't throw your money into a stock or fund because it's a big name. Finally, diversify! If you're in it for the long-haul, you need to make sure that some really bad news doesn't keep the kids from going to college.

That's it for now. Check out

www.stockmarketplus.com

for investing news and tips!

Scott is the inventory control manager for a large winery, and maintains and publishes stockmarketplus.com, his own financial blog.

---

Why You Need To Buy and Sell Gold Coins (Part 2)

How to Collect Rare Coins For Fun and ProfitTime has... Read More

How to Invest Overseas - Intelligently!

In recent months, many advisors have talked a lot about... Read More

Looking For a Safe Investment? Try a Certificate of Deposit

If you are looking for a safe investment and you... Read More

The Difference Between Investing and Trading

Investing and Trading are not the same thing. The returns... Read More

Trading For A Living - Part 2

In part 1 of this article I started to look... Read More

Wit and Wisdom on Money, Wall Street and Success - Part #1

I love to collect quotes as they concisely promote a... Read More

Investing and Asset Allocation

Sometimes you spend sleepless nights worrying about which stocks to... Read More

How To Start Investing For Financial Independence, Part 1

Today, I am going to start a multi-part series about... Read More

Bankers in Denial

Denial is a ubiquitous psychological defense mechanism. It involves the... Read More

Investing: The Art Of Making Your Money Work For You

There is a lot to know about investing. It all... Read More

Part II of Day Traders and Swing Traders and Options? Maybe!

Before every protective put trade it is possible to calculate... Read More

Get Wealthy With the Rule of 72

When it comes time to retire how many people would... Read More

The Biggest Oil Opportunity in the World ? And How You Can Profit From It

Where is the second biggest deposit of oil reserves in... Read More

Investing In Sons Business Could Cause A Real Family Feud

Q: My youngest son wants to borrow $5,000 to start... Read More

How to Setup a Profitable Trading Business

In my opinion trading is the most exciting and best... Read More

Need To Trade!

You don't HAVE to be trading.As a novice trader, you'll... Read More

Buying Florida Investment Properties and Where Its Hot

Relaxing in Style: Florida Investment PropertiesIn Florida, relaxing in the... Read More

Press Release Scams and Successes: Reading Between the Lines

Press releases are a means through which companies can keep... Read More

Gold and Silver Maple Leafs Get New Packaging

Gold Maple Leafs and Silver Maple Leafs are receiving packaging... Read More

Annuity Investment Guide

While there is not a lack of information on annuities,... Read More

Real Estate Clubs Hot Among Investors

Six or seven years ago, the stock market was booming,... Read More

Super Rules, OK?

Do you rule your superannuation or does it rule you?It's... Read More

Investing for Retirement - Not an All or Nothing Play

In 1519, Hernando Cortes, beached on the shores of unexplored... Read More

Landlording 101, Tricks of The Trade

Looking Inside Your Tenant's Mind Basic Mind-Reading Report 101 for... Read More

Chinas Inscrutable Currency Strategy

Purpose: Expose Opportunities for Smart InvestorsThe move by China's central... Read More

Trading Tips No 7: Developing a Casino Mentality for the Day Trader

I submit that the successful day trader would profit well... Read More

Types of Investment

The word 'investments' is one that most of us are... Read More

Investing 101: Risk Terminology - BETA

About thirty years ago, statisticians armed with all of their... Read More

Trading Commodity Futures Using Support and Resistance - Paper Trading

Setting Up a Paper Trading AccountQuestion: I cannot trade with... Read More

Options Education: Financing the Calendar!

As a trader, one of the key things that I... Read More

Annuity Owner Mistakes

Okay, so I can tell you I have sat in... Read More

Is Your Mutual Fund the Right One for You?

Mutual Funds are considered to be one of the best... Read More

It?s Not the Size of Your Bank Account

You might think that if you win the lottery or... Read More