don’t make your broker rich

soon going to enter the stock market and just did the first thing an investor should do – started reading the intelligent investor – the classic by Bejamin Graham.

stocks are popular in investments for high rewards they may get you. while CODs (certificates of deposits) get you 5% interest, stock market has given on an average ~10% and more returns.

If I ask you to invest your hard earned money in my company then probably you will ask me 1001 questions about me, my company, its background, business, net capital and what not and even after that you will require me to show you my balance sheet. BUT do you actually do even 50% of this analysis while trading ?

Its your money and you must research. Do not invest money only, invest time as well or you are destined to lose !

Benjamin Graham says that stock investing consists of three ‘must’ elements:

  • you must thoroughly  analyze the company and the soundness of its underlying business before you buy the stock.
  • you must deliberately protect yourself against serious losses.
  • you must aspire to adequate, not extraordinary performance.

Another important thing in alignment of the topic of this blog entry, is not to make your broker rich and yourself poor 😦 by speculating and not investing. Graham urges you to buy (after analysis) and hold. Do not speculate. So being a day trader is bogus from the point of view of investments.

So should I never day trade ?

You can. Every intelligent investor should keep a small amount of his portfolio as “mad money” (10% or so) which can be put to speculative risk.

makes sense ?