Some of the Basics

william the wie

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(Feel free to add where I omit or correct my errors, which hopefully will be few,)

Cash is king and capital gains don't count until realized.

Nobody knows exactly what will happen, when and to which security. You can use "Stock Trader's Almanac" to find out the probabilities of when.

Now I'm going to invite others to contribute
 
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william the wie

william the wie

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which security will get hurt worse, not worst.

Every August AAII runs an ETF issue complete with risk columns.

High risk only works in bull markets

Low risk works all of the time.
 
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william the wie

william the wie

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As to what will happen no one knows for sure well enough to consistently generate profits.

What is highly recommended is to get into the lowest risk instrument in as many sectors as your securities account permits.

Try for equal amounts of money in the different sectors that you are in.

Generally the time to buy is when the market is low and generally sell when the market is high.

Dividends, interest, rents, option premiums and capital gains should be reinvested.
 

fmdog44

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More Basics;
Invest only in what you understand.
Do not chase winners, meaning don't buy after you see a stack has soared.
Diversify, or like an old wise one said "don't put all your chips in one basket".
Keep the number of stocks to four or five in very different industries, like finance, technology, pharmaceutical's and retail for example.
Do not ever try to "time" the market.
Keep some cash ready on stand by in case we see a 10%+ drop so you can take advantage of low prices.
Do not be afraid to sell a winner.
Dollar cost averaging is a proven system.
Do not follow the advice of your buddy or uncle.
Never leave yourself with out at least six months of cash reserve.
Don't eel guilty if you are nervous about buying stocks. If you are nervous then simply do not buy, having a lot of cash is nice (especially when he markets plunge).
 
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william the wie

william the wie

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More Basics;
Invest only in what you understand.
Do not chase winners, meaning don't buy after you see a stack has soared.
Diversify, or like an old wise one said "don't put all your chips in one basket".
Keep the number of stocks to four or five in very different industries, like finance, technology, pharmaceutical's and retail for example.
Do not ever try to "time" the market.
Keep some cash ready on stand by in case we see a 10%+ drop so you can take advantage of low prices.
Do not be afraid to sell a winner.
Dollar cost averaging is a proven system.
Do not follow the advice of your buddy or uncle.
Never leave yourself with out at least six months of cash reserve.
Don't eel guilty if you are nervous about buying stocks. If you are nervous then simply do not buy, having a lot of cash is nice (especially when he markets plunge).
Not much to argue about in that except in nuance:

Equality of piles including cash to keep the KISS principle operating for when it gets really scary out there.

I much prefer ETFs with options to individual issues for ease of automatic balancing of the piles at a profit.

In sum I think the 87 crash made a bigger impression on me than on you.

Thanks and great input.
 

fmdog44

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Speaking of the crash of 87 a young coworker approached me a few days before the fall and asked me my thoughts on Fidelity Magellan which at that time was the place to be. He wanted to take his money out of his workplace 401K and pile it all in to that fund. I warned him against doing so and the rest is history.
A great example of greed getting to people is the internet rage when all believed they could make their fortune in companies with no value just by pouring all they had in to internet funds. I was on chat lines every day with young people claiming they were applying for every credit card they could then max them out to but internet mutual funds. When I strongly urged them to remove their young heads from their young butts most called me an old fool and they would tower over everyone with their new sound easy money wealth laughing at me all the way. I often think back to those days and wonder about those kids and how reality treated them in the end. The internet era was maybe the most interesting era of all with market gains and losses that defied all logic. I did own The Jacob Fund, The internet Fund and The Munder Net-Net Fund but got out while the getting was good as experience told me there was no way those gains would last.
 
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william the wie

william the wie

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Ooh! 1992-2006 was so nice. Everybody expressed the opinion that I was an idiot buying utility stocks direct from the company treasury minus 5% of foregone underwriting costs. I was making something north of 22.45% just on the discounts. Around 2006 increasing agency fees dried up that well. That is still a great starter market because of the dividend reinvestment discount but it is necessary to use either snail mail or a ton of passwords to stay diversified.

Now I use AAII to get risk data so, I can stay in positive carry hedges when needed like now. When the Shiller PE is this high I pull in my horns. I know a crash is inevitable but I don't know when.
 

Flopper

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which security will get hurt worse, not worst.

Every August AAII runs an ETF issue complete with risk columns.

High risk only works in bull markets

Low risk works all of the time.
Low risk portfolios is the way the go for most people. You can make your fortune in the market without taking big risks as long as you're willing to do it slowly and invest on a regular basis regardless of market valuation.. IMHO, most people should not own stocks and bonds but rather mutual funds or ETFs.
 

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