My Advice to You
Date Added: February 1st,
2003
By Chris Stallman
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I'm
not much different from you. I'm a 20-year-old who worked a
part-time job throughout high school, enjoys going out with friends
on the weekends (and weekdays too, for that matter), and loves going
to football games. I get stressed when it comes to schoolwork and
expectations. While I have a number of passions, I don't know
exactly what my future will hold.
The one
point where everyone seems to think that I'm not like most people
is when it comes to my biggest hobby: investing. At the age of 14,
I developed this insuppressible passion for investing and the stock
market. That's what ultimately led to the creation of TeenAnalyst.com.
The site was founded on this idea that investing isn't as complicated
as everyone seems to make it out to be. And people are more than
able to make their own investment decisions.
That last sentence is what has given me a lot of grief
lately. Are people really able to make their own investment decisions?
I mean, just look at our society; everywhere you turn, people are
telling you about that "hot new stock." People are quick
to point out their investment successes and feel that this qualifies
them to expunge their stock picks on everyone else.
My advice
to you is to ignore anyone who points you at a stock. Plenty of
people out there can help you understand investing concepts and
strategies, but never (and I mean NEVER) buy a stock because someone
else has told you to. Would you ever buy a new car because someone
told you to, without researching it and taking it for a test drive
first? Probably not. This is the same thing. In fact, don't
even listen to the stock picks here on TeenAnalyst. That's not
what they were intended for. We intended on simply providing an
example
of how you can evaluate stocks. We don't want you to actually
buy them because of what we say.
In fact, no one can predict short-term markets all
the time. Buying shares of stock means that you are buying a share
of the business so the best way to approach investing is to buy
stock in a company that you can see as a viable business. The next
thing you have to remember is that you shouldn't buy a stock
at any price, even a good one. Many mutual fund managers buy shares
of stock in big-name, "solid" companies. These companies
will probably always be around but there's a flaw in that investment
strategy. So many of them think that General Electric, Microsoft,
etc. are good investments at any price. They're willing to buy
these stocks at 40 or 50 times earnings. That's just stupid.
A Mercedes C230 is a good car, but would you pay $50,000 for it
if it was only worth $27,000? Don't be afraid to wait for a
stock to get into your price range. If that means waiting a year
for XYZ Corp to drop down to 20 times earnings, then do it. Be patient.
Warren Buffet once said the following:
"I call investing the greatest business
in the world because you never
have to swing. You stand at the plate,
the pitcher throws you General
Motors at 47! U.S. Steel at 39! and nobody
calls a strike on you.
There's no penalty except opportunity
lost. All day you wait for the pitch
you like; then when the fielders are
asleep, you step up and hit it."
That saying also alludes to the fact that some of the
best opportunities to buy are when the majority (the fielders) are
saying that there are no opportunities. Take a look at our current
situation, for example. The market is down considerably from its
2000 highs. And while this has been bad for a number of investors,
it has helped filter out the bad companies and make the good ones
even cheaper. Some investment companies out there are saying, "We
just can't see any good stocks right now. Everything seems to
be going down." What do these people expect? There's no
such thing as a magical bell signaling that it's a good time
to invest. The symbols of good stocks don't twinkle when you
open up a copy of the Wall Street Journal. You, and only you, have
to go out, look at the company, and ask yourself "is this company
a bargain? Does it have enough solid fundamentals to provide me
with a good return?"
As a new investor, you need to learn to trust yourself.
One bad investment isn't the end of the world. Think of it as
a learning experience that will help hone your investing skills.
And when people tell you to invest in some hot new telecom stock,
just remember that it's your money, not theirs. And who knows
how to handle your money than you?
Now here I am at the conclusion of this brief little
article. I could say that by following this advice will lead you
to turn out like me. It won't. Instead, it will lead you down
a path that will allow you to reach your own goals, not someone
else's. And that's what matters. Oh yeah, and have some
fun.
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