A Road Map For Small Investors Stock Trading Fundamentals (23)
After 22 videos explaining the realities of the stock market, we have come to a stage where a realistic strategy for small investors can be formulated.
1) You should treat stock investing as a business. Give it some thought and time everyday. There is no need for full time. You manage and profit for the short term in order to build the long term (See my videos #4,17).
2) Let no other people play with your money. If you dont know how to invest, learn! If you dont have time to learn, forget investing! (Video #3)
3) There is no fair play in the stock market. The big players plan, conspire and control the whole scheme of things. If you cannot beat them, join them and follow their coattails. While they are making millions, you can profit handsomely as well with some diligence and insight (Videos #1,2,5).
4) Stock investing starts and ends with money, and nothing else. First of all, determine the price range of the stocks that you can afford to purchase with no bias about company or industry. A good range is between $5 and $20 per share. Be flexible to switch companies when one falls outside of your range. Under $5 is dangerous territory where most bankrupt companies eventually end up (Videos #15,16,18).
5) In the stock market, the time of least risk and most opportunity is when you are holding cash. If this is true, playing short term is a viable alternative even though the experts say otherwise. Continuous small short-term profits will add up significantly over the long term (Videos #10,17).
6) Before you buy a stock, ask yourself whether you are buying at the bottom, middle or top. If you have no idea or no historical perspective of the price movement, you should forget about playing stocks (Videos #8,9).
7) More than 95% of the things you see or hear are outdated or irrelevant. So it pays to identify the few certainties that exist (Videos #12,14, 9,17).
When times are uncertain and people feel anxious, stock prices will definitely fall, which is a real certainty. The financial meltdown starting around September 2008 and a prolonged recession that follows form a toxic combination. The end is not in sight so dont guess the bottom (Video #9).
9) Stock prices are always a few months ahead of significant events due to company top executives sharing information with the big players. Thus the public (or herd) is always late to react. Trying to stay in front of the herd, you can become a smarter investor by holding onto the coattails of the big players (Videos #19,21).
10) A stock moves up because the big players plan it, not because of what the analysts say. A real price surge is due to their continuous buying for at least a few months until a bubble is created. The bubble lasts until the same big players decide to cash out. A price decline that follows is due to the continuous stock unloading by the big guys, and will last shorter than the upsurge. By this time, the analysts will tell a different story (Video #21).
11) Do not buy when the stock is on a declining path because you never know the bottom until you see it. The only exception is that you want to play the short-term wide fluctuations where you go in and cash out quickly.
12) The best time to buy is when a recession shows signs of ending where good stocks are seen bottoming out. How do you pick the good ones? By eliminating all the risky one. The public does not have much timely data except two important facts: well-established companies, and sufficient profit for the last few years to enable survival through the recession. In the current toxic environment, many well-established survivors have been beaten down. They have suddenly become affordable within a year. Their stock prices can go down even further. The following are some worth looking into:
General Electric (GE): down from $40 to $13, annual profit $20 billions.
Microsoft (MSFT): down from $36 to $18, annual profit $17 billions.
Pfizer (PFE): down from $24 to $14, annual profit $10 billions.
Intel (INTC): down from $27 to $13, annual profit $7 billions.
Bank of America (BAC): down from $47 to $11, annual profit $5.5 billions.
Alcoa (AA): down from $44 to $7, annual profit $1.6 billions.
International Paper (IP): down from $34 to $10, annual profit $0.8 billions.
Applied Materials (AMAT): down from $21 to $8, annual profit $1 billion.
Dell Inc. (DELL): down from $28 to $9, annual profit $2.6 billions.
Nokia (NOK): down from $40 to $13, annual profit $10 billions.
For further information, please email to stockfessor@comcast.net
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