Personal Finance - Part Three
Jesse Livermore says "The average man doesn't wish to be told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn't even wish to have to think."
Are you a news junkie?
Well If you are, hopefully you're not making investment decisions based solely on the financial news or stock market analysis that the media provides all day and every day.
When the stock market goes down, they say ask the question, "Has the next recession finally arrived" And when the market goes up they ask, "Are we at the beginning of a new bull market?"
What they don't often tell investors is that the reality of why a market moves is actually far more technical than that. In the world of stock market investing, there are two ways to analyze a stock.
A fundamental analysis not only looks at the company, but also looks at the overall market. How's the economy? Are people buying anything right now?
The other type of analysis is technical analysis.
While it is advisable to continue SIP investments with a long-term perspective, there is no compulsion. Investors can discontinue the plan at any time. One can also increase/ decrease the amount being invested.
Pure technicians don't care about much of what the fundamentalists study.
The technicians look at the stock's chart. They look for patterns in the numbers and they invest based on those patterns.
Where do you find those purely technical analysts? In the computers .
The media's analysis of why the market went up or down on a given day may be right, but other than the high frequency trading computers (as well as other technicians reacting to the fundamentalists), what really moved the market was largely the result of some complex math run by a series of computers. So the basic rules for stock investing are
Set a goal of how much money you want to make; Set small and concrete goals.
Buy the stock that makes most sense to you, not to some article writer or big shot trader, but to you.
Wait until you've made that money and then sell.
Above all else, be patient. The stock market takes time. Sometimes it takes leaps, but mostly just time. And remember, it works.