My Best Advices About the Stock Market
Making a living in the stock market
This is the eighth article of a series. The previous article is “The Problems With Growth Stocks”.
I haven’t found the necessary time to continue this article series as I wanted. So, I am finishing it today. For the closure, I will give you the quintessence of what I have learned in more than four decades. I will give only three short advices, because the more advices we receive and longer they are, the less important becomes each.
The first advice is so good and important that I was planning to give you just that.
1) *DIVERSIFICATION*
The market is *unpredictable*. No matter how much we study it, and how long the market has been doing exactly what we had “predicted”, we never master the market.
The protection against the unpredictable behavior is diversification.
Of course, we are always making assumptions. We buy shares of a good company, believing that it will remain good (or become better). That’s OK. The important is to remember that the market has no compromise with our “predictions” and bets.
2) Know (more or less) the asset
Have a reasonable notion of the value(*) of the company which stocks you want to buy, hold or sell.
Don’t sell it too cheap. Don’t pay too much for it.
There is always a clown (thief?) in the market recommending you to buy or sell for absurd (against your pocket) prices.
(*) In general, it is always a fair multiple of its average annual profit.
Imagine that there is a shoe shop near your home. It profits $100,000 every year. Would you pay $1 billion for it? No? Exactly! So… beware IPOs, right?
3) Money Talks
Companies that pay good dividend every year hardly are lying about their *health* (exceptions exist).
That’s it! I was going to say goodbye, wishing you good business. But there are matters more important than money: health, freedom, peace, family, friendship…
I wish you well!
