Buy or not to Sell?

In my lifetime I have always come across people who are extremes. One who save too much and the other who save nothing. Its very rare that I have seen someone who knows how to strike a balance. I have had arguments with all three kinds of people and none of them has been able to fascinate me. Then there are some like my husband who no matter what manage to loose money. Not because they want to but because something beyond their control happens and the money from the bank account just vanishes. So what is the right approach? I am no Warren Buffet or Suze Orman but from what I have learnt from my finance courses at school and experience from work is that there is no one who can not save or not stop saving too much. It's a personal choice. We as individuals find ways to do things we want to do. Which means we have control on how we save or spend money. I had a professor who always said that life was all about making choices and living with it. I totally agree with her. 

As adults no one but only we know when to start and when to stop. There are things we are good at and things we are not good at. We can try and master things we are not good at or look for professional help. I have come across infinite number of people who say they know all about stocks and they are probably the ones who loose  most of their money in  stock market. I feel for such humble beings. 

There are enough noble laureates out there who started hedge funds that went straight down the drain. And then there is George Soros who made millions and millions on his quantum fund. The darling of the stock market title goes to Warren Buffet, he wins it hands down.

Stock market has its own charm. It is like a mistress to many since it can change colors, be extremely demanding, sometimes give pleasure but most of the time elude. Key is to know what indicates the mood swings.

Personally I take second opinion from my advisor on whatever investments I make. If one reads Warren Buffet's autobiography the first lesson one learns is that information, lots and lots of information along with math is the secret to success. Who provides information about the stock market? Obviously many people who know it all plus the well trained analysts who do detailed home work before they publish their results. Most of the time information comes from the sell side analysts. Buy side analysts keep it mum. Generally because they do not get the required information from the firm. Which means we, as humans should look for lot of opinion all the time. Warren Buffet knows it all but still seeks expert opinion and that has worked for him for not five or ten but for over thirty years. 

Accepting that we do not know something does not make us less of a person. It makes us Warren Buffet. ;-)

I always say this as an example to people,"You know where to get oil for your engine, you also know where to pour the oil but do you do all that on your own?" NO! You go to a specialist. Investing in a market is the same. Spending $300 an year on an advisor can save you tons and tons of trouble. These advisors do not wake up one day and say,"Gee! I am bored with the current profession I guess I will become an advisor." It is a long process. Of course there are some who mislead people and I in no way advocate such individuals. But at the same time there are a few who are genuine. Through this all I am trying to say is that there is help out there. All we need to do is weigh pros and cons and make the right call. 

For instance a particular company's stock  at one time sky rocketed but then as the economy tanked it went nose down. I checked the balance sheet of the company along with the footnotes and I realized that the firm had a lot of potential. And based on my research I gave  this  one person free advice to continue holding the considered company's stock. The Counter argument to my free advice was," You say it is a good firm then why is it not performing?" For which I replied look around. What does the economy look like to you? The fact that this company has a good growth rate in spite of this godforsaken economy should ring a bell in your head. You should well equip yourself with "BUY AND HOLD" strategy for this stock. The next question obviously was, how long? This was and always is an interesting question.

How long is based on so many factors such as the economy, competitors, and so many other things. At a time when everything in the market is crumbling people overreact to the smallest of things. Smallest of performance during good times is celebrated with laurels and biggest of achievement in tough times looks unsatisfactory. Everything can be measured and quantified but the psyche of the market is hard to follow. There is only so much one can do to understand what exactly causes panic. Numbers can define many things but not everything. 

Therefore one should always invest in stocks based on one's need. Short term, long term or medium term. Try and keep a good balance between bonds and stocks. If you have stock options given to you at IPO price or ESPP's use it prudently. Not everything needs to be sold. Check the company's balance sheet, read as much as you can about the firm and the market. Remember information is power. If not for anything else get an advisor at least to clear all your doubts. Making money is easy but making decision is difficult. There are times when a stock is worth $10 and the next day worth $150 or $0.10 cents. Was it luck. NO! Probably you missed something vital or you ran out of patience or were over confident. Find out what was that caused you to miss the signals and then work on it.

Again I am no expert advisor myself,  but I am a person who has some idea of what happens in the market. I might not be able to help someone make a fortune but I can sure guide people as a friend and a fellow human being. 

So far I have successfully guided a few of my friends and they are thankful I did which makes me and them equally happy. But only we can be our own best friend and by following what I have said might not help one  end up like Warren Buffet but it sure will help keep you from ending like,"Joe, the stock market loser."