The recent media circus surrounding the super-fast run-up and run-down in AMC, GME and a handful of other stocks has put a spotlight on the money that can be made and lost in the stock market.
Much of the hype surrounding AMC and GME has been attributed to a Reddit group, and while I’m sure they were a factor, they were far from the only factor. The spin cycle never lets the truth get in the way of a good story, and suddenly this Reddit group was being coronated the next coming of Warren Buffet, Gordan Gekko and The Hunt Brothers (google it youngster) all in one.
It brings front and center a question as old as the stock market: Where can one turn to for good advice? While there is no shortage of advice, good advice takes a little more digging to find.
First, never forget that it is your money, and you are in control. Don’t let any article, chat group, financial advisor or relative take your control from you. Countless investors have lost money because they didn’t understand what they were getting into. Remember, ignorance doesn’t get your money back. Be self-aware of what you do and don’t know. If you don’t understand, don’t do it.
It’s important to note, investing and trading are not necessarily the same thing. Trading implies more frequent buying and selling in an attempt to capture shorter-term gains, whereas investing implies less frequent buying and selling as well as longer holding periods. Trading is more akin to gambling, whereas investing is more akin to buying a business.
While many millions of individuals have been successful at investing without having much specialized knowledge, a much smaller percentage of individuals have been successful long-term traders. Those that have been successful did so because of relentless work honing their craft.
That being said, there are thousands of offers to help you get rich quick trading with one google search. Almost all of them are not what they say they are. If it were easy, don’t you think more people would do it?
This brings me to my second point: Don’t follow blindly.
Whether it be a financial advisor or an internet message board, always keep your eyes wide open, and don’t follow advice just because someone said so. Do your homework and make sure it makes sense to you, too.
Professional investors use advisors, articles, papers, message boards, Twitter, etc. as part of the research process to help them formulate their own ideas, opinions, and strategies. They don’t blindly follow – they research, think, then act (or more often than not, they choose not to act). Consider doing the same.
On that note, talk to people you know. Find out if they invest, if they do research, or if they have a financial advisor, etc. It’s great to learn from others, to find out what they are reading, and get referrals to recommended professionals.
That being said... again... don’t follow blindly.
Sometimes you discover your friends found their way into the off-the-beaten-path part of the internet, and maybe are not where you should turn to for advice.
If you are not comfortable investing on your own, you may want to work with an advisor, but still do not follow blindly.
Know this fact: NOT ALL FINANCIAL ADVISORS ARE CREATED EQUALLY. If you chose to work with an advisor, talk to multiple before selecting one, and research “Questions to ask a financial advisor”.
Each advisor has her/his own way of investing, charging, etc. You want to find the right fit for you.
Which brings me to my third point, individual stocks are much riskier than diversified funds.
Most people should put most (or even all) of their investment dollars into a diversified portfolio of funds. You don’t HAVE to pick stocks. Most experts would probably recommend you NOT pick your own stocks.
Personally, and professionally, I see value in learning about individual stocks, maybe even putting some of your investment dollars into them, but putting most of your investment dollars into diversified funds.
For those of you interested in researching individual stocks, this brings me to my fourth and final point, it can be hard to know who to trust for good information.
It is a balancing act to sift through the hype machines in mainstream financial journalism, while avoiding the dark corners that don’t look like dark corners.
Here are my favorites sources.
Investors Business Daily (investors.com) is my favorite source for information on individual stocks. It was started by William O’Neil, the author of the book “How to Make Money In Stocks”. Although some of the articles are only available with a subscription, there are many articles and educational videos available for free on their site and YouTube channel.
Barron’s is one of the most respected investment publications in the U.S. It is delivered weekly by paper, but their website is updated constantly. Similar to investors.com, some articles are behind a paywall.
Seeking Alpha. Dubbed “the largest investment community in the world”, Seeking Alpha is a great source for intellectual opinions on individual companies and their stock prices. It is also a good source of transcripts from earnings calls with company executives, in case you want to hear our info directly from the horse’s mouth.
In closing, let me remind you that investing often seems more complicated than it really is. Financial advisors, journalists, and hacks like me all make it more complex than necessary. No matter what you do – rest assured that the simple approach is often the best approach.