Updated on January 23, 2012
Obviously, my thoughts and ideas on the stock market has evolved over the years. I wrote the stuff below about 5-6 years ago. Forget pretty much everything that I said below, with the exception of the “how do I get started” section. I still recommend opening up a trading account at one of the online brokerages like TD Ameritrade or Interactive Brokers. Definitely a Roth IRA first, and then another retirement account after that, and lastly, a regular trading account, in that order. The money that you play with should be retirement first, then incoming generating later…of course, it all depends on how old you are, and your retirement goals. I’m 35 right now…still far from retiring, so time is on my side, I hope.
Now, about my market strategy these days. If you’re one of those people who want to figure out the market, then so be it. Experiment with different trading systems, trading strategies, etc. Who knows, maybe you will be one of the lucky few who remains disciplined enough to 1) find a trading system that works consistently, 2) stick to the trading system through thick and thin until it fails. Me, well, I’m not disciplined enough, nor is the average Joe. I’ve learned over the years that temperament can’t be taught, nor learned, it’s a trait that you can say, one is “born with”.
With that being said, it doesn’t mean that one cannot succeed without the right temperament, it just means that one must adapt to their own capabilities. For me, I spent way too much time studying the markets, with too little results. If I’m making $1/hour doing something, then it doesn’t really make sense for me to continue doing it. I stop daytrading because it wasn’t worth it. So, I started swing trading. My trading system wasn’t working, so I switched to a new system, which was to follow people who were doing well via newsletters and blogs, and then interpreting their thoughts and adding my own.
So, instead of trying to invent the wheel with my own trading system, why not just follow someone who’s already been there and done that? The Hulbert Financial Digest is a great place to start. This guy, Mark Hulbert, has been following newsletters and trading sites for over 30 years now, and every year he ranks the top trading systems out there. I don’t think he actually offers financial advice himself, he just ranks the newsletters (I think). Find a newsletter that fits your style of trading, and fits your goals, then subscribe to it. Annual subscriptions usually go for about $150-$400, but if you’re trading a good amount of money (>$25,000), then that’s just a small percentage (<1%) of your trading portfolio. This is probably one of the easiest and most effective ways to get started.
The Prudent Speculator, which is a Forbes Newsletter, is also highly rate. I think it’s $195 for a one-year subscription. It was also highly rated investment newsletter by The Hulbert Financial Digest in the 15, 20 and 25 years time frame.
Secondly, if you’re brave and want to venture out on your own, then you gotta go through all of the financial blogs out there. There are a ton of free ones, and then just pick and choose which stocks, ETFs, Mutual Funds you want to invest in. I read a ton of financial blogs, but here’s one that I enjoy the most The Fly @ ibankcoin.com. This guy runs a private “hedge fund”, probably more like an “investment club”, although I think he probably works with $50 million+ in OPM (other people’s money). He’s entertaining and a pretty damn good strategist. Another one that I enjoy is The Reformed Broker. His blog is more like Techcrunch, where there’s a bunch of writers writing articles for the site. One of the investment newsletters that I enjoy is the NoLoad Fundx Newsletter. These guys have a very detailed plan of attack. Not to mention that they’ve been ranked pretty highly in the Hulbert Digest for more than 15 years. Anybody can make 150% in one year, but can that same person make 10-20% averaged out of 15-20 years? Consistency is key.
So there you have it. The chart, technical analysis bullshit…give it up. Know it, and understand it, but in order to succeed, you gotta take as much good information as possible and digest it into action. Then, you can use your technical analysis to find an entry and exit point. The person who’s able to disseminate the most useful information is usually the winner. That’s what I’ve learned.
Good luck.
Originally published in 2005
How do I get started? Well, the first thing that you need to do is to fund a brokerage account. If you have a spare $4,000, then I’d recommend that you open up a Roth IRA at Ameritrade.com and start swing trading. Swing trading is when you buy a stock and sell it a few months later for, hopefully, a profit. The thing about a Roth IRA is that all profits are non-taxable and you can take out any of your initial contributions at any time without penalty! Trust me, it’s the best thing to do for beginners with smaller bankrolls.
