Timothy Vick has been a student of the stock market for enough years to know that it’s not nearly as complicated as some so-called experts would lead you to believe.
Vick, a market analyst and financial writer in the Chicago area, says that investors need to learn how to process information, keeping what is useful and dumping the rest.
And he’s equally convinced that if you don’t know what you’re doing, you can and will be your own worst enemy. Vick says that the vast majority of the time, investors can avoid making major mistakes by doing a little more homework and sticking to a strict investment strategy.
Vick believes that the most successful investors are those who make the fewest mistakes and in his new book, “Lessons for the Individual Investor,” he offers 101 tips for winning the war on Wall Street. (The soft-cover book is published by NorthStar Financial Inc. and sells for $17.95. It’s not in bookstores yet, but can be ordered by calling 800-711-7503.)
The 101 lessons, he says, revolve around the following central themes that can make you a better or more confident investor:
Don’t invest in a vacuum. Stay current on the stocks you own. The more you know about those individual companies, the fewer mistakes you’ll make. “The ability to step back and judge a stock or the entire market for its broader implications is among the most important skills an individual investor can learn,” Vick says.
It will protect you from buying “bargain” stocks and keep you in the market when others wrongly tell you to sell, he advises.
Determine your financial goals and stick to them. “Set your trading criteria before you buy and don’t deviate no matter what is occurring in the market,” Vick says. If you want income-producing investments, don’t start buying tech stocks. If you set a price target of selling when a stock gains 50 percent, don’t hold out for 60 percent.
Before you buy a stock determine in advance at what price you will buy and sell the stock, your maximum holding period, your profit expectations and the maximum loss you can tolerate.
Resist the public’s passionate impulses. The irrationality of the market often leads investors to shun stocks when they are low and buy when they are high. Vick says that the average share of stock changes hands eight times as often during rallies as in declines.
For example, he says the smart money on Wall Street was dumping utility stocks in 1993 but many investors held on until the end of 1994 when it was late in the game and prices were falling. On the flip side, Vick says you couldn’t convince anyone to buy Citicorp at $10 or Microsoft at $35 - and that was just a few years ago.
Find an investment adviser who you can trust. You need someone who will carry out your wishes and make decisions that match your goals.
Read as much as you can about how the market works and how stocks are priced. Ignore the “quick-buck” books. Learn how to decipher the raw financial material from companies, such as annual reports and prospectuses.
Learn from past mistakes and understand that everyone in the business has made them. Everyone from your neighbor to Warren Buffett has had their share of market errors. “Let the market’s rich history serve as an invaluable reference of what works, what doesn’t and what’s possible,” he says.
The following fields overflowed: CREDIT = Scripps-McClatchy Western Service
Local journalism is essential.
Give directly to The Spokesman-Review's Northwest Passages community forums series -- which helps to offset the costs of several reporter and editor positions at the newspaper -- by using the easy options below. Gifts processed in this system are not tax deductible, but are predominately used to help meet the local financial requirements needed to receive national matching-grant funds.
Subscribe to the Coronavirus newsletter
Get the day’s latest Coronavirus news delivered to your inbox by subscribing to our newsletter.