Dumb Money

Many people have, at one time or another, taken some of their hard-earned money, 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 are smart, but they probably just ended up lining the pockets of brokers and investment funds if 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 do not even scratch the surface of our knowledge potential. We invest without carefully read financial statements and annual reports of companies, seeking instead to message boards and TV stock "experts" for guidance. If you own mutual funds, you know what companies are funds business? Most people have no idea.

Investors may be merged into two categories: smart money and dumb money. Most people are "dumb money". Smart money beats the market regularly and contains many investment funds. Domme lose money overall. Stupid money often over-reacts to market pressure.

There are a few ways to avoid "dumb money" ...

First, forget the short term basis. If you plan to buy and sell stocks quickly, statistics show that, on average, you lose, and possibly large losses. Longer-term investors are not easily put off by the market fluctuations, 10% price swings, or a bad earnings report. Plus, they do not have to pay on the transaction and as 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, do not go along with the crowd. Example: Walmart's stock is a great investment in the past 5 years, right? Wrong! It's actually lost about 5% of the time. Still, if you watched CNBC, you would swear that Walmart was the best thing since sliced ​​bread. Find a strategy that makes fundamental good-feeling, and not to throw in a stock or fund, your money because it is a big name.
Finally, diversify! If you go for the long haul, you should make sure that some really bad news not the children to go to college. In the

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Scott is the inventory manager for a big winery, and maintains and publishes stockmarketplus.net , his own financial blog.