How To Make Real Money In The Stock Market

When watching investment shows, it is always amazing to listen to the bad advice they give. Granted, they like to stay safe and feed the standard advice to the masses. Let’s see if you’ve heard this one before: stay diversified to reduce your portfolio risk. Sounds logical doesn’t it? You probably hear this from your financial advisor as well. But isn’t this a defeatist attitude to take? You are already conceding that your stock picking sucks so you want to minimize the damage of your bad choices? Why not just do good research from the beginning and thus, that minimizes your risks.

This is what Warren Buffett teaches us, and he should know best, since he’s the world’s premier investor. He’s an octogenarian and he still does things the old fashion way which is to buy and hold stocks good stocks forever. His long term stock picks view is certainly in sharp contrast to the fast trading that most young investors prefer. But as they say, he who has the biggest bank account wins and you certainly can’t argue with the success of Warren Buffett’s stocks.

Buffett’s strategy is to buy stocks in the mind set of a real business owner – which in reality, every investor is to some small degree. But perhaps in this frame of mind, then most investors would be more careful with their money instead of making crazy decisions on penny stocks which would require some risk mitigation.

While there is great satisfaction on buying stocks of young companies and watching them grow, these are long shots because these companies don’t have the track record or financial reports that would justify your investment dollars. Therefore, while it’s not exciting, why not just buy value stocks of good companies whose share price have fallen due to the recession? Pretty soon, the market will bounce back and you will be rewarded for your patience.

There’s a saying of don’t put all your eggs in one basket but there’s also a contradictory saying too -put all your eggs in one basket but just watch that basket. If you do good research, you don’t need to mitigate your risk. At least that’s the way to make real money in the stock market.

From time to time, I allow my reader’s to make guest posts. This is one of them.