STOCK INVESTORS SHOULD BE PREPARED TO BE WRONG

Am I the only one that buys stocks only to watch them go down the next couple of days? It seems that 90% of the stocks I buy go down right after I buy them. It's almost as if my buy order signals the stocks to go down! Now I am pretty sure that I must be experiencing selective memory but it does seem that way nevertheless.

If you are going to learn to invest your money in the stock market, one thing you have to be prepared for is that you will have losses. You will make bad stock picks and you will be wrong some of the time. It doesn't matter whether you are picking your own stocks or whether you are taking the advice of a professional, you will have stocks that are losers sooner or later.

The good investor will learn how to minimize those losses by getting out before too much damage is done but he also knows when to buy back in. The good investor will also be able to pick more winners than losers and learn how to negotiate the ups and downs of the market for a lifetime of smart investing.

One way you can lose money is by doing a lot of panic selling. Some investors hate to see their stocks go down and once it seems like that is the way a stock is going, they sell it. Selling isn't always bad of course, but if you are doing it all the time based purely on emotion because you are scared, you will find it very hard to make money in stocks. You should usually be buying and selling stocks based on a stock's fundamentals and the future you see that company having.

2008 was an awful year in stocks and a lot of people lost a lot of money. The same thing could be said right after 9/11 when the market went down fast because of fear and panic. Now, anyone who sold during those times when the market was plummeting did avoid further losses and that is good for some people. But if you kept your money in after 9/11 you got it all back several years later and a lot more.

The same thing will probably be said about the Dow going from 14,000 down to 7,000 in 2008: if you left all your money in you have gotten a lot of it back as of today and will most likely get all of it back, eventually. That is if you have the time to wait.

Panic selling and selling based on fear means that you are most likely afraid to buy back into the market. You are often paralyzed and your money will be out of the market too often. It is a fine line between being out of the market based on what you see happening with the economy or a stock and being out of the market just because you are scared.

When you invest in stocks, you have to be prepared to withstand some losses and be alright with the fact that your stocks may not go up the second you buy them. You also have to know that some of your picks will be bad ones. The good investor will be able to recognize the bad picks based on what is happening with the company or economy that turned the pick from a good one to a bad one.