3 Ways To Beat Market Speculation
Whether or not you invest in securities, you have probably heard wild predictions about how the market will react. You've heard optimist screaming in TV saying, "NOW IS THE TIME TO BUY!". You have also heard dreaded words like "recession" and "sell-offs". Through trial and error, self-education and practice I have three ways that I beat market speculators at their own game.
1. Set Buy And Sell Rules
No matter what news you read about a stock, it should never trigger a transaction on your part. Sure, take heed to the news. Digest it, but whatever you do, don't react too fast. What you should do is set rules for every stock you own. For example, if you value a stock at $10 you might say the stock is on sale at $8 (buy now) and overpriced at $12 (sell now). Most brokerage accounts let you set alerts to help you stay true to your rules.
3. One Opinion Is Never Enough
Good or bad, a single opinion on a stock is never reliable. You should do some more research and validate each opinion you come across. This will help you avoid extreme volatility in the market. In other words, go down the easy stream, not the white water rapids.
3. Know The Company
In my early investing career, I have been burned one too many times by blindly following "expert" stock pickers. I'm not here to say they are all wrong, but usually they aren't revealing the whole story. If you read about some pharmacy company that is about to release a groundbreaking medicine to cure all health issues your initial thought is, "Holy Crap! I need to buy some shares of that company". You might be right, but do you know anything about the company? Have you seen their debt-to-income ratios? Have they paid out dividends for an extended amount time? What do their profits look like compared to other companies in the industry? If you don't know these things, then that piece of news is worthless to you.
In your military career, how many decisions do you make purely off speculation? You gather facts first then make a decision. Keep that in mind.
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