The
words of an amateur stock market speculator: "If the market goes up it's a
trade, if it goes down it's an investment." Many investors love to gamble on stocks and
if their pick rises they are quick to take their profit before they give it
back. But if it goes against them they hate to realize a loss and refuse to
sell until they get their money back. This is how they make a win into a
short-term trade and a loss into a long-term investment. The problem is that
their upside may be their target of say 5% while their downside could end up
being 100%. What a crappy upside/downside risk! Instead, stop gambling and buy
a diversified portfolio of stocks and let time do its thing. Your brilliant
decision to buy "Newfangled Enterprises Inc." may net you a total
loss. But if you put that money into a large-cap Index fund and hold it for 10+
years, you are likely to be a big winner.
- Larry Pike, CFA, Client Priority Financial Advisors LLC
- www.clientpriority.com
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