Learn The Stock Market And How to Trade

A lot of people have been hurt in the recent stock market drop off.  Those hardest hit were probably those who paid their money every paycheck to their IRA’s and 401k and were just getting ready to retire.  Could you imagine feeling you had enough to retire then only be half way there after a couple of bad weeks?

For decades fund sales people and personal finance have told us that the stock market grows at 8% per year while bonds only average 6% and money markets are 1-3%.  Those extra 2 – 3% over 40 years can make a huge difference in your portfolio growth.  While this is all true there are a few bumps in the road that often get neglected when teaching people about the stock market.

The stock market growth is not in a straight line.  It has swings up and down and sometimes has swings way up and way down.  If it’s really high up it’s called a bubble, no one seems to have a problem with these.  When it’s way down it’s called a crash.  You never have control of when these market swings will occur.  Sometimes you get lucky and the big crash of the century occurs right when you’ve started investing so most of your money goes in on the low side.  Sometimes it happens when you’re about to retire.  Imagine thinking you’re done working and about to retire and then WHAM! you’re only half way there again.  This is the buy and hold mentality and you just live with it. 

Your alternative is to manage your investments yourself (or pay steep fees for hedge funds that put a little more effort into their choices.)  With managing your money yourself you can just play it safer all the time by diversifying between money markets, bonds, and stocks.  This will usually lower your risk, but also lower your reward.  Choosing this route will often make your stock investment career a more stomach-able ride, but may make it very difficult to save enough for retirement due to the lower returns. 

Your only other alternative is to add some timing to your investments with some risk control.  Often times with combining fundamental analysis, technical analysis, with some good money management you can improve your overall returns while minimizing risk.

There is no one right way to do this that I can place in one 400 word post, but read through the site and you’ll find things that you can blend into your own style.  If you need any help feel free to comment or drop me an email.

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