Sunday, September 04, 2016

10 reasons you should never own stocks again

1. You’re not that good at it.
Its really hard to buy stocks. Its not just picking stocks and watching it go up 10,000%. Its buying them and watching them go down 80% before they end up going 20% from your original price. Its waiting. Psychology is at least 80% of the game. I don’t need to go over the statistics. Most people sell at the bottom and buy at the high.

The average return of the market over the past 70 years: 10.7%. The average return of the individual investor? 1.9%. And that’s probably generous.

6. True wealth in the stock market comes if you can hold forever and not diversify.
Warren Buffett says, “Wide diversification is used only by investors who don’t know what they are doing.”

I’ll give you an example: imagine having 100% of your portfolio in one stock, never ever diversifying for 20 or 30 years, and watching it sometimes go down over 50%, maybe even in a day. Guess who makes mistakes like that. Bill Gates (MSFT stock) and Warren Buffett (BRK-A stock) [See, 8 Unusual Things I’ve Learned About Warren Buffett].

So the guys who make real stock market wealth never diversify and never sell. You know how many guys get rich like that? Less than 100. Then there’s the other 100 million people who own stocks.

9, Well, what about daytrading?
A lot of people claim to do that successfully. They are lying.
Please see my article “8 Reasons Not to Daytrade”. I got a lot of criticism after that. People wanted to show me their tax returns to show me how good they daytraded. Get lost, punks. Some people make millions playing the violin also.

Doesn’t mean the other six billion people on the planet should perform in Carnegie Hall. In any case, we’re talking about investing in stocks. Not scalping like a little kid with eight terminals in front of him. And guess what, even the best daytraders in the world with twenty year track records go broke sometimes.

-- James Altucher  [linked from this article]

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