Today, I want to tell you a story.
It’s a true story that also illustrates how the advice I often give to investors can help them reach their financial goals.
As you know, I have more than 30-years professional trading experience (I mean real big money trading). And folks often ask me, “How do I get started?”
In fact, several months ago, a young lady at the Fox studios in New York, who works there and with whom I had talked several times in the Green Room while a guest on Varney & Co., asked me that very question.
She is a person who never had an investing account and never made a trade, but because she was working at the Fox Business Network was surrounded by “the market.”
She had decided to overcome her fear about what she didn’t know and wanted to start investing in her future by learning how to invest in stocks. She wanted me to give her a stock recommendation.
But that’s not what I did…
I explained to her that for me to properly – and legally – give her one-on-one personal investment advice, I’d have to learn about her finances and her expectations and everything that’s important to know about a person before setting up a financial plan for them.
I told her she should manage her own future because she was willing to learn; and by learning she would become an expert on what was going to work for her.
Still, she was stuck on getting a stock recommendation from me to start with.
I asked her what she was interested in and what she knew about.
She said, “I’m not knowledgeable about any stocks, I don’t know about any of them.”
I told her she was thinking about stocks, and NOT to think about stocks. I asked again, “What are you interested in? She answered “fashion.”
Perfect. I asked her what designers she liked. Without missing a beat she said, “I really love Michael Kors.”
That’s all it took. I said, “Then why don’t you look at the Michael Kors company, and think about Michael Kors stock based on what you think about the company? You know the stores, you know what they sell, you know they’re popular and you know why.”
That rung a bell loud and clear. She agreed that she would love to follow the stock because she follows the company and its clothes, so she would have a great feel about how the company was doing, what direction it was going in and if they were getting more or less popular.
The next week I was back at Fox studios to guest on a segment. I ran into my friend. She excitedly told me she had opened an account at a discount broker (which I told her to choose over a big brokerage house) and bought Michael Kors stock. She bought it back in the fall of 2013 in the low $70s. KORS hit $101.04 not too long ago.
That’s how you start. You pick something you are interested in, something you like, something that you follow because you are interested in it, because you use their product, or their technology, or drive their cars. Whatever, it doesn’t matter.
The hardest place to start is always the beginning.
Lesson 1 is that every trade of course starts out as a trade. So does every investment.
It’s not complicated, so don’t overthink it. Even if you have the best intention of buying that stock that is going to be the perfect investment that makes you a billion dollars, you start out the same way every time. You buy it. THAT action is a trade. You’ve just put on a trade. If you’re lucky or smart enough, that trade will become one of your investments.
It should have a beginning and an end. It just so happens that if the end is measured in years or infinity, that trade has blossomed into an investment. That’s a great thing.
But, the reality is markets move, stocks move up and down. New technologies and paradigm shifts happen at the speed of a mouse-click. What might be a great trade that turns into a great investment doesn’t mean it will always be worth holding.
So, every beginning begins with a trade, you put on a position.
The question is, what position makes sense? What should you trade? What kind of investment keeps on appreciating and pays dividends and keeps going up?
There is no answer to that question. That is the question we all want answered.
Remember, no-one is more responsible for your money than you.
Yes, you can and often should listen to “experts” just make sure they are experts.
What’s important is what they say, the information they give you to ponder. It is an opinion, usually based on knowledge, history, analysis and it’s worth thinking about. Experts are best used as a mirror. What are they saying and what does their information mean to your thinking?
Brokers are NOT experts. They are intermediaries. Their principal job is gathering assets, not analyzing markets and picking stocks or trading.
Some brokers, and by some I mean an extraordinary few, are really good. The good ones actually “manage” money. They do their own thing. They don’t just follow what their parent company tells them to do. They don’t just shoehorn like accounts into the same tired and boring useless platforms. They do some of that, if they’re good, because they’ve set up better platforms. But those are the true money managers, not mere salesmen. If you find one of those brokers, they’re worth having. But that doesn’t mean you go blindly down their path.
It’s still your money… NOT THEIRS.
For most people, you’re better off doing it yourself.
There are plenty of resources on the Internet to do all the research you’ll ever need to do.
And there are plenty of really good investment newsletters that for a reasonable price give you trade recommendations with explanations. Still, again, it’s your money. That doesn’t mean you just follow anyone blindly. Yes, you can follow people, but never follow anybody past your own comfort level, on any trade, ever.
How do you do it yourself? You start where you are comfortable. You trade into positions you understand. If you’re following someone, including me and my investment newsletters, you can take all the recommendations if you’re given a plan to get out.
If you don’t have a plan to get out, don’t get into the trade. Or you can take the recommendations based on your comfort level.
So that’s your investing lesson for today. There will be more coming.
Of course, I’m going to continue to this Wall Street Insights and Indictments space to knock heads, call out some crooks and creeps, and tell it like it is.
But I’m also going to show you how to make big money in the markets.
Some of the lessons will teach you a little history, some will make you laugh — sometimes you’ll be laughing at me for some of the mistakes I’ve made.
But in total they will make you a better trader and investor. That I promise you.
Of course your input is incredibly useful. So please let me know what you’d like to learn about most? Just send me a message below.