ARE YOU INVESTING OR JUST PLAYING THE MARKETS?

I
subscribe to the theory of quality buying over quantity buying. I try
to
invest in about five or six stocks that I have researched and followed
sometimes for several months.
I spent the first part of my investing years buying into a story
someone else dug up and ran with quick profits to the next big hype. But
soon you find your profits are smaller and the pool you have built is
empty. I started off with a Government pension
and rallied it into a position that has grown on strong fundamentals on
an otherwise risky exchange. Some people like to call the Stock Exchange
the Vulture Exchange. There are several reasons for this in my view.
The main reason seems to be all of these commercials on TV that have
tried to push Mom & Pop traders into full time do-it-yourself
millionaires. In creating these ads they are now showing Grandma taking
control of her investing future with an electronic trading account.
Someone seems to have presented the riches made by high profile traders
as luck that can come easily if you have the access to the trading
platforms. I'm not trying to say that Grandma and Mom & Dad are not
doing a little bit of due diligence but lets be honest here, most seem
to get caught up in whats hot on the boards. A good friend of mine who
works as a financial advisor called me to say his father in law gave him
a tip on a hot stock. When he asked why it was a good stock he said he
read all about it on the bullboards and everyone says its going to be
great. I almost spit up my coffee laughing. Everyday I go through who's
trading high volume and who's share price is rising but that's not a
simple science to follow. This is a good start point if your looking for
the next big runner but now the hard work should start and intense due
diligence is the only true way you will know if its a good fit for you. I
get hundreds
of tips and I can honestly say I have looked at every one of them but
rarely find what suits my level of risk vs reward. I research new trends
and try to get ahead of where I think the masses will be in weeks or
months to come; and then I get a position. Its not a very exciting way
to play
the markets but its better than being an action junkie. When I feel my
investment has
flat lined or the selling pressure exceeds the buying then I take out my
position. Sometimes I only take out my original money but usually when I
am done with a stock this means I get out period.
In
my opinion some investors have recently focused not so much on higher
gains but more on acceptable losses or even a safe stable place to park
money. The world crisis has pushed precious metals up but not to
ridiculous levels yet. The average investor self directing pension or
topping up pension with unregistered funds is trying to find a safe
haven. GIC's seem to be a favoured place to "park" funds and if that's
your style then ask your bank what the current rate of return is for
locking up your money for a year or two. I am guessing its about 1.75 %
and that could move up slightly on the short term. That's better than a
loss and although its not a very sexy way at making money it may help
you sleep at night. I like the stock market and live with the ups and
downs. No one is always up no matter what they say to your face. This is
similar to the gambler in Vegas who says they always make money. There
is built in risk and some games have a higher reward based on risk. This
is not a good way to look at investing. If a stock has dropped below 5
cents I tend to expect a reverse split. If I want to wait it out I could
be there a long time. Not too many people want to finance a stock at
that level so a reverse split helps to hide dilution. Sometimes it works
well but that's not typical on any market.

If
you have decided to trade you need to spend the time working on where
the value is. When you get a new fence built you shop around for a few
quotes right? Well the reason we do that is so that at the end of the
day we know we got the best value that's available. The market is
similar. If I decide to get behind a junior gold stock then dig in and
start reading up on who's drilling, who's got a good land position and
who has cash. If your company is cashed up and has a low entry price
then this is a good start point. Now look at the management, the
property they are exploring and the government support for the project.
Set a realistic time line on your investment. Mining companies have a
honeymoon period of excitement when the drills are turning but when they
stop some investors quickly forget about all the good that has been
done. This can cause the stock to go to sleep temporarily while the
company moves towards production or a compliant estimate on its
resources. Don't forget to pay yourself along the way for your loyalty.
No matter how much hype there is about the company you are watching
always make sure you buy it based on your needs and goals and you will
be fine. Very few traders get rich overnight and some that do lose it
later on another high risk play. Remember "high reward" usually comes
with "high risk" and one big hit and your out of the game for good.
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