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.