LEARN TO TRUST YOUR OWN STOCK PICKS

I've been investing and buying stocks for a long time and one of the most difficult things I have had to learn is to trust my own stock picks. In fact, it is something I still haven't been able to do and in the last couple of years it really cost me.

Sometime last year I got interested in shorting Netflix. I don't use them myself and after researching their service, decided against it because most of the movies that are offered are old. If I have no interest in signing up, I thought maybe others felt the same way. About this time there were also many articles from various sources saying the stock was overvalued and after really thinking hard about it, I agreed with them.

So, I shorted them at around $200 sometime during the beginning of 2011 and watched the stock daily. I watched as it went up and down but there were pretty much two ups for every down. The paid was bad as the stock passed $250 and kept going higher. And higher. And higher!

I just didn't know what to believe as I felt I was right about the stock but I just couldn't take the pain of losing more money every day as it continued to rise. Finally I gave in around $290 and covered my short for an ugly $90 per share loss. I was sick....but not near as sick as I would soon be.

About a month after covering my short I watched in horror as what I thought would happen all along did: the bottom fell out of the stock and it lost more than two thirds of it's value in a little over 4 months. THAT was what I was betting on before and so not only did I lose a big chunk of money, I wasn't around to reap the rewards.

This year I have had another very disappointed stock result when I bought Nokia at about $3.30 after it came down from the 5's. I knew it was a gamble but they had the Lumia phone with the Microsoft operating platform and I just didn't believe that this company would totally fail. I felt they would ultimately do well in the 3rd world countries and in places where people couldn't afford a pricey iPhone.

Well, unfortunately for me the price continued to go down as I read article after article from slews of analysts saying that Nokia was on the fast track to bankruptcy. There was just nothing good reported about Nokia and the price kept going down until I decided to at least get something back and I sold at $2.01. Another big loss for me but I felt good about it after the stock went down further to $1.69.

So now I sit here writing this and watching Nokia hit $3.26 after going straight for all of August and had I just held on a bit longer I would not have sold and almost been at the break even point today.

Is there a moral to the story? I'm not sure but if there is one I think it is that I need to trust my instinct a bit more. These are two instances where I took a big stock loss and had I just waited a bit longer, would have been proven correct. No matter how much experience you have buying stocks, how much money you have, or how convinced you are that you are right, it is very hard to hold on to a stock when things don't go your way.

In these instances the pro's would say I was "early" but "early" doesn't pay and instead can cost you. I don't feel I was early, just a dummy.

MONTHLY INCOME FROM DIVIDEND STOCKS

Interest rates are, for all practical purposes, zero. That means anyone who needs an income from their savings and investments can't get the job done by buying bank CD's or Treasury bills. It seems there is no safe way to make money from your money in 2012 and unfortunately that isn't going to change for a while.

So what are your options if you do need to turn that cash into a monthly revenue stream? Right now, dividend stocks are just about the only thing around. I came upon this article that details a plan of buying six different stocks that pay regular quarterly dividends that are spread out during the year. If you buy a stock from each of the six groups listed below, you will be getting a dividend check twice a month.



















Depending on what stocks you buy you might be able to get between a 2% and 4% return through dividends and that sounds great, especially when considering the half a percent you will get via a CD.

It sounds like a wonderful strategy but you really need to beware! Even though each of the stocks listed pays a decent dividend and is considered a relatively "safe" stock, there is REAL RISK here. You shouldn't go out putting all your money in dividend stocks just because they pay a dividend unless you are prepared to lose money if the stock market goes down.

Right now with all the trouble in Europe and the high debt that we are drowning in, I feel there is a real chance the market will go down from here. Putting all, most, or some of your money in any dividend stocks just because they pay a dividend might not be your best option.

Yes, you can get a monthly income by choosing a variety of stocks that pay dividends at different times of the year. Lots of people are doing it but if the market goes down violently (or even steadily), those stocks will probably lose value. "Safe" is a relative word in the stock market and all investors should fully understand the risk they are taking on to get that small dividend payout.

FACEBOOK STOCK: A BAD INTRODUCTION TO THE MARKET FOR BEGINNERS

We are now one day removed from all the crazy hype that the Facebook IPO generated. Almost every article you read today is saying negative things about the company and the stock is down about 10% as I write this.

Clearly it has not been a good opening for Facebook. What I fear most though, is that many first time individual investors are going to sour on the stock market as a whole if Facebook doesn't recover.

I have a couple stock market blogs and the number of hits they got last week leading up to the IPO showed me that many people were going to make Facebook the first stock they have ever bought. It is a company millions of people use every day and thus they understand it and with all they hype, thought they better invest in it.

Anything that introduces people to investing in stocks I think is a good thing. The more people that learn how to buy stocks and take charge of their retirement, the better.

For many, Facebook is clearly the stock that has driven them to open their first account with a discount broker account and go through the process of funding their account and buying that first stock. All that might have been intimidating to some but they still did it because they didn't want to miss out on the next big stock. Who wants to miss out on getting in on the ground floor of the next Apple or Microsoft, right?

Personally I don't care whether Facebook makes billions of dollars or go bankrupt as I didn't purchase any of the stock and I don't plan on buying any either. But I don't want to see people have their first experience with the stock market be a negative one.

I hope this ridiculously overhyped Facebook IPO can at least do one good thing: bring more investors into the market who stay and make building up their portfolios a lifetime goal. It will benefit them with their retirement and it will benefit all of us by bringing new blood into the market.

DON'T GET YOUR STOCK PICKS FROM TEXTS!

It might seem obvious that good stock picks probably won't be found in spam. But I guess everyone wants to get in on the ground floor of a good deal and that is why this type of thing works.

Have you ever met someone who doesn't want a good stock pick? Stocks are almost like the weather: they are something people can discuss at cocktail parties, outdoor get togethers, or just about anywhere. It is a subject that is good conversation and it often is combined with people discussing the economy and how the country is doing.

A good stock pick is always welcome. It is sort of like an inside tip at the horse races and who wouldn't want that? Yes, there will always be a demand for that one stock that will be different from all the rest and turn out to be your next big winner.

That is the mentality that stock picking text spammers count on when they send a message that they have the next hot stock. There is always an urgency because this tip isn't going to last long! There service is the best (they will say) and the one stock they have for you will be going up guaranteed. Don't miss it by waiting!

Spammers have been around forever in all sorts of forms and now they have clearly moved to the texting platform. If the saying "there is a sucker born every minute" is true, don't let it be you when it comes to stock picks.

Listening to professional analysts is one thing and that always carries with it some risk. But getting taken by an anonymous text about a soon to be hot stock is clearly something even the greenest beginner shouldn't let happen.

IS THE APPLE HYPE "FORCING" PEOPLE TO BUY STOCKS FOR THE FIRST TIME?

I got an email from a reader who had just bought their very first stock. Its a buyer's remorse type of email as this person was wanting confirmation from me that they did the right thing, even though it was already done. Here is the email:

I never bought a stock before because of my limited knowledge of investing. But today for the first time, I decided to buy 17 shares of Apple ($10k worth) in anticipation of the new iPad release Friday (I like Apple and I own a Mac which I'm using now) I bought the stock for $589/share with a $530 stop loss.

Do you think I made the right decision? Do you think using a stop loss at 10% less was a good choice? Do you think I just bought into the hype and the bubble will burst? I appreciate any advice you can give me. Thanks.

I wrote back and told them that I couldn't comment on any one particular stock but most analysts think the stock will continue to go up from here so don't worry too much.

This email is a great insight into the mind of a stock investor. The difficult decision about whether to buy Apple stock could come from a novice investor like this person or a much more experienced investor and it shows how emotion can play a big part in the stock buying process. It doesn't matter who you are or what your experience level, pulling the trigger to buy a stock can be a difficult decision that doesn't stop with the purchase. After all, the decision to sell can be just as hard!

The desire to make money and not miss out on something that is getting a tremendous amount of media airplay is, I believe, bringing in a lot of first time investors. We hear about Apple and it's skyrocketing stock every day. The fact that so many people own and love their products means that it is hard to escape the story even if you are not an investor. But for anyone that has a little spare money to invest, the desire to jump in can be too hard to resist. This person can't be the only one that is buying their first stock and making that stock be AAPL!

A new investor like this will, undoubtedly, spend much of today refreshing their computer screen to see what the price is hoping to get confirmation that they did the right thing. Confirmation to them would be the stock continuing to go up. They will do a lot of that for the days and weeks ahead as putting $10,000 down on one stock as their first stock purchase was a big move. But as the weeks go by they will probably pay a little less attention to the hourly price and just check it every day.

Any Stock Market For Dummies book will advise against putting a big chunk of money down on one stock as your first purchase. Diversity is always recommended and achieved by buying different stocks in different industries. Betting everything on one stock is well, a bit like gambling and you can lose big. At least our reader put in a stop loss to prevent that.

Whenever you have a stock that goes parabolic (Google was the last one to do it), you get new investors that just have to get in. They see and hear that everyone else is making money and they want a piece of the pie. It is their first introduction to the stock market and that is a good thing.....lets just hope that they get out with a gain so that they learn to invest correctly next time by spreading their money around a bit more to mitigate the risk.

THE BEST STOCK MARKET GAME - FREE ONLINE

The stock market is always interesting to new investors and with interest rates at an all time low, there are very few ways to make money with your savings. Stocks are about the only way to have a chance of getting a decent return but there are risks and lots of confusing terms to learn.

Now there is a fantasy stock trading game for all those who want to get involved and learn the ropes and terminology without the risk. Wall Street Survivor is the best stock trading simulation game out there and the good news is that it is absolutely FREE! This game and site is meant for beginners and people who want to learn about the stock market and how to trade online.

I signed up (takes less than a minute) to see what it was all about and let me tell you , there is a lot going on at this stock simulator game including weekly and monthly contests where you can win prizes. First of all, you make buy and sell stock trades just like you would on any other real stock site platform. So, when you learn how to make the trades at Wall Street Survivor, you have learned how you would do it at a real online broker for real money.

The amount of material that is available for FREE is amazing. They have training videos, tutorials, a massive forum, contests which everybody is automatically entered in, a research section, and much more. Once you sign up you will quickly realize there is no shortage of things to do on Wall Street Survivor and things to learn.

Initially, you are given $100,000 to start out in virtual cash which you use to build up your very own stock portfolio. You can buy and sell stock (with your fantasy dollars) at the real prices of the stocks as they go up and down during the day. Just like in real life, you can learn how to short sell, set stop limit orders, put in orders after hours and just about anything you can do at a real online broker you can do here. You will be managing your very own stock portfolio through simulated trades that are executed on a real-time stock trading platform. As you can see below I am up a little from my starting amount of $100,000.

Wall Street Survivor is a very cool FREE site where you can learn how to invest and manage your own stock portfolio without any of the risk. So, once you feel comfortable with how the market works and how to do some research, you can sign up with a real online broker and jump right in. If you want to know what the market is like and what it would be like to have your very own portfolio of stocks that you can trade, this free stock simulation game is a no brainer. Sign up for Wall Street Survivor today and give it a spin.

STOCKS FOR DUMMIES: GREEN BAY PACKERS STOCK

It is not the easiest thing to make money in stocks but it is especially hard if you bought some Green Bay Packers stock last month. That stock is truly stocks for dummies as a $250 "share" of the company is 100% worthless.

The Green Bay Packers are a US football team that has some of the most loyal fans of any sports franchise. That is why the team was able to sell those worthless shares to raise money for a future new stadium. The fans were willing to plop down that kind of money per share just so they could proudly own part of the team. The thing is though, that they don't really own anything more than a piece of paper. Anyone who thought they were investing in the team is/was sadly mistaken.

It is a great way for a team to make money and the Packers are probably one of the only teams with such a loyal fan base that they could do this. It was reported that they earned more than 62 MILLION from the sale of stock which should be more than enough for a new stadium. I'm sure 99% of the people buying the stock new it wasn't worth anything but were willing anyway just to be able to display their certificate (see below) and say that they helped the team.

I'm sure the taxpayers of Wisconsin were happy with this money raising tactic as well so that they didn't have to foot the bill. Most professional sports teams are able to milk the taxpayers whenever they need new stadiums and in this awful economy, any new taxes are a heavy burden. By successfully issuing this stock in the team, the Packers were able to get what they want/need without angering any of the taxpayers and potential fans.