10 Reasons You Should Never Own Stocks Again

I’m really bullish on stocks and the economy but I don’t think most  should waste their money investing in stocks. You might as well flush it down the toilet. Or throw a big party. We already went over that. And please don’t buy a home. Just relax a little bit if you have some extra money.

I’ve been writing about stocks for almost ten years now. The first time I ever got paid for writing anything was a check for $200 I got from thestreet.com when I wrote in late 2001 about stocks that were trading for less than the cash they had in the bank. I never cashed the check.

(Should you put your money in stocks?... Are we in a bubble?...How about mutual funds?...I answer all of these questions and more in my Ultimate Cheat Sheet for Investing.)

10 Reasons Not to Buy Stocks

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.

(9 out of 10 people think they are an above the median driver. 9 0ut of 10 people think they are an above the median investor. Both are impossible)

2. Your competition wants to slit your throat in a dark alley. You know how Batman’s dad got killed? He’s walking in the street with his beautiful bejeweled wife and his innocent little son, Bruce.

Then this guy comes up to them and says, “give me your wallet and your jewels”. So Dr. Wayne (somehow he made billions being a doctor but thats another story) hands over his wallet and his wife’s jewels. Bruce, the son, is scared to death. Then you know what happens?

The thief shoots the father and mother in the head and runs away. He ALREADY had the money and he still shot them in the head and killed them when they had nothing left.  Little Bruce watches and screams while blood streams out of his both his parents. Hopefully they died instantly.

I happen to know who that thief is. Warren Buffett. And you are Bruce Wayne’s dad.

Warren Buffett, Stevie Cohen, all the great investors go outside every day and they want to take your wallet, steal your diamonds, maybe slash your face for fun, and then after they’ve gotten everything they can get from you, they are going to shoot you in the head in front of your child and run off into the dark of the night.

Good luck fighting that kind of competition.

3. Competition, part II. A broker once told me this about Stevie Cohen. (see also, “How Stevie Cohen Changed My Life”) I don’t know if its true. I don’t care. Its just gossip.

Maybe it was even a joke but he was a broker and he told me this. I’m not making any accusation. But the story was this. Cohen would find out where the CFO of a public company was going on vacation. Then he’d send a guy over there. Suddenly on the beach, the two would just happen to be getting their tans right next to each other, share a few margaritas, the information starts flowing.

I’m not saying inside information. Its all just conversation. And it might not be Stevie Cohen. Its any of these guys. Every day there’s one dollar up for sale. Who is going to win that one dollar. You? Or the guy who sends his private detective to lie down on the beach next to the CFO of the Next Big Thing.

4. Competition, part III. I know another guy. He has code that scours the FDA databases looking for any microscopic changes in any documents.

You know what happens when some of those documents change just a little? A press release comes out a week later. A stock gets halted. It opens up or down 50%. Who is going to win the dollar? You, or the guy who wrote 100,000 lines of code scouring the FDA databases.

5. It’s mostly a scam.

I’ve seen the worst, many times over.

I would never ever trust any number that comes out on a 10Q, no matter how GAAP compliant it is according to government standards. Enron was GAAP compliant. Until they were bankrupt and everyone either went to jail or mysteriously died. If you were fully loaded in their stocks you might die also. From pills or a noose or from mistreatment in a mental health clinic. Because its not fun what happens to the shareholders.

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.

7.The best investors in the world make on average between 10 and 15%. We already know because of the above that you are probably not going to be among the best. So, if you pick some stocks and passively hold them maybe you’ll earn half that: 7%. Are you happy with that? Then fine. But given the volatility in the market I don’t think thats a good enough return for most people. Look,some people are good. And some people should invest. But most shouldn’t.

8. The other people who make money only hold for 1/trillionth of a seond.

Some trading firms set up their operations right next to the buildings with the computers that process all the trades on the exchanges.

They then pay for high speed cables to go right into these exchanges so their trades get their before yours. These guys make a lot of money in the markets by getting in the middle of every bid-ask faster than anyone else can.

Its a race to the bottom but billions are made. So we see now the way to huge wealth is to either trade in millionths of a second or to hold huge blocks of your net worth in one stock for years. This is not a good strategy for 99.9% of people.

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.

10. Stocks are really boring. Other than Apple, which is a fun stock.  I own a stock right now that cures irritable bowel syndrome, for instance. You know how many hours I had to research all the drugs for irritable bowel syndrome? And then talk for many more hours with the CEOs of every irritable bowel syndrome company? And then try to figure out how big the market is? Not an easy task.

Would you admit in a poll that you have irritable bowel syndrome? And some of the cures for IBS sound worse than the disease. And then how do you value one of these companies?

Oh my god. Its so boring. And so now I own this irritable bowel syndrome stock that I think will do well. But when? Maybe it goes down for five years before it goes up 1000%. Who knows? Maybe someone has a bad day at the FDA (maybe an undiagnosed IBS “incident”) and a drug that everyone thought was a no-brainer gets rejected. Who knows? Who really knows? No matter how much information you have about a stock we’re all going to be dead in 100 years anyway. But hopefully a few less people will be dead from irritable bowel syndrome. (Btw, aren’t you happy that I didn’t include an image about IBS here?)

So wait, not so fast. You said you were “incredibly bullish on stocks”. And you even write about stocks sometimes. So what are you talking about? Is it all a big scam?

Yeah, it is. But 200mm ipads are going to sell in the next couple of years. So I happen to like Apple. (see also, “Apple will be the first trillion dollar company“)

I don’t believe in stocks. I believe in innovation.

We are seeing innovation in energy, tech, biotech, 3D Printing, Sensors, the internet of things, robotics, synthetic biology, and so on.

 

Here’s my strategy: I like to follow hedge funds that hire PhD research scientists who know everything about these areas. I like to see what they do. Whenever they make some noise.

So I like stocks in general. But I don’t think people should buy stocks or play with index funds (then you are just subject to the random volatility of the market).

Not everything has to make perfect sense. Make your own decisions. Financial media pretends to hold your hand but thats a big scam also. I’ve worked for many financial media firms. They all love four or five stocks: Apple, Amazon, Twitter, Tesla, etc.

But there are 8000 public companies. Not just five. Look at all the data, then make your own decisions.

The best way to take advantage of a booming stock market is to invest in your own ideas.  If you have an extra $50,000 don’t put it into stocks. Put it into yourself. You’ll make 10,000% on that instead of 5% per year.

But if you are a bit older and don’t feel like starting a company, it’s ok to find the right hedge fund managers and follow the stocks in their public filings whenever they take a big position. This isn’t an easy strategy. If you’d like to hear more about it, I’m happy to write about it.

I’m sitting in a cafe right outside the Wall Street Journal as I write this. I think lots of stocks are going to go up in the next few years. I think a lot of people are going to be happy if they wait out this economy.

There’s a guy who works here who doesn’t seem to like me because he’s sweeping all around me.  I think they want to close up and I’m clearly in his way right now. He wants to go home early, maybe, and kiss his wife and kids. Hopefully his wife is in a good mood. Maybe they’ll fool around a little tonight. He’s had a hard day here today. I hope to god five years from now he’s happier than he is now.

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  • http://www.lhartwich.com Lukas Hartwich

    Interesting stuff James! I wrote a similar post the other day: http://lhartwich.com/post/4974326471/todays-greatest-investment-opportunity

    Nice to be in your company :-)

    • http://jamesaltucher.com James Altucher

      Great post. Just read it.

      • http://www.lhartwich.com Lukas Hartwich

        Wow, thank you so much! You just made my day!

      • UraniumC

        +1. except I love my trash TV…..

  • http://twitter.com/RockwellShah Rockwell Shah

    I’m curious James, in your opinion, what general areas should the average person investigate for investment, if not stocks?

    • http://jamesaltucher.com James Altucher

      SUbject for another post. BUT, I am bullish on the stock market and the economy.

      • Artiecab

        Money finds a home only where it’s appreciated.

  • George Jefferson

    penny stocks are the way to go… actc.ob will make you rich!

    • Artiecab

      ACTC great company.  Lost 54 million last year.

      • artiecab@aol.com

        LOL Excellent post

  • nir

    What is a good investment then, as alternative to stocks or real estate?

    • shortnotsilver

      Check out the stats on physical silver.
      dont-tread-on.me
      maxkeiser.com

    • shortnotsilver

      Check out the stats on physical silver.
      dont-tread-on.me
      maxkeiser.com

  • http://twitter.com/stephenguise Stephen Guise

    Hahaha, that IBS stock is definitely boring. Those boring stocks can be big money-makers though. The way I look at it, almost anyone could have seen Netflix, Apple, and Amazon’s rise to fortune at some point along the way. They are the leading companies for where the world is headed.

  • http://twitter.com/abdul_mcgee Abdul McGee

    “The best way to take advantage of a booming stock market is to start a company. Because everything goes up. If you have an extra $50,000 don’t put it into stocks. Put it into yourself. You’ll make 10,000% on that instead of 5% per year.”

    This part proved to me that you know what you’re talking about! Started with $500, just got on first mill.

  • C Pennybrown

    Most of my money was made investing in the stock market. Each time I put 100% of my cash on one stock and then borrowed the maximum my broker would give me. But hey, it worked.

    So, yeah, I agree with you.

    Nassim Talem would say I was just a “lucky fool”. Sometimes you have to risk it all to make big money.

    Then once you have big money making 7% a year on it doesn’t sound so bad.

    So my advice is: What do you feel so strongly about, think is such a good idea with great prospects that you are willing to risk it all on that one idea?

    • Jack

      I read a story once about how a guy died with millions in his bank account and he was practically a hermit. He made his money in the stock market. What he did was buy to the hilt on margin all the time. I am doing it now with a small fund that is paying 18% and making money. I intend to keep doing it. Trading is the ultimate fun for me and the ultimate disaster when I lose. So far this year, I am ahead. I’m happy.

  • zzen321

    Generally I’d have to agree. Fortunately I’m not the general case. Probably it’s just luck though …. cause I have no idea what I’m doing …

  • http://twitter.com/bullbearpigs John Long

    You own OPTR?

  • http://www.parmcharm.com karen parmelee

    My parents have their retirement in stocks. I think the dream and the hope (delusion) is that their broker will make them wealthy. The broker makes a living and their additional income seems a gift. A business model that mostly benefits the broker. But being retired is scary so to them, worth the gamble that gives any payback. If they were smarter, they’d have done differently. Isn’t that largely the motivation for laymen playing the stocks?

  • http://www.parmcharm.com karen parmelee

    My parents have their retirement in stocks. I think the dream and the hope (delusion) is that their broker will make them wealthy. The broker makes a living and their additional income seems a gift. A business model that mostly benefits the broker. But being retired is scary so to them, worth the gamble that gives any payback. If they were smarter, they’d have done differently. Isn’t that largely the motivation for laymen playing the stocks?

  • http://www.parmcharm.com karen parmelee

    My parents have their retirement in stocks. I think the dream and the hope (delusion) is that their broker will make them wealthy. The broker makes a living and their additional income seems a gift. A business model that mostly benefits the broker. But being retired is scary so to them, worth the gamble that gives any payback. If they were smarter, they’d have done differently. Isn’t that largely the motivation for laymen playing the stocks?

  • E_spalding

    Know little about stocks, but it’s always seemed a rigged game to me – why would a ‘normal’ person take on these sharks on their own turf ?

    Reasons to be bullish – been thro’ the worst, so it’s got (& is!) getting better and real estate is a bust until the, uhh lenders, decide they’ve got enough cash papering their backsides.

  • E_spalding

    Know little about stocks, but it’s always seemed a rigged game to me – why would a ‘normal’ person take on these sharks on their own turf ?

    Reasons to be bullish – been thro’ the worst, so it’s got (& is!) getting better and real estate is a bust until the, uhh lenders, decide they’ve got enough cash papering their backsides.

  • E_spalding

    Know little about stocks, but it’s always seemed a rigged game to me – why would a ‘normal’ person take on these sharks on their own turf ?

    Reasons to be bullish – been thro’ the worst, so it’s got (& is!) getting better and real estate is a bust until the, uhh lenders, decide they’ve got enough cash papering their backsides.

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  • http://twitter.com/fledglingtrader Aris David

    People who bought AMAZON, AAPL, GOOGLE in 2008 are all sitting with nice gains today <- Luck, but luck comes to those who are prepared!

  • http://pulse.yahoo.com/_UTGKOUQMYRSS2LFT2EZHDH5EOI J.

    >even the best daytraders in the world with twenty year track records go broke sometimes.

    yeah, I read Neiderhoffer’s Practical Speculation where he talks about how he went broke. He grossly violated money management 101, in a way that GUARANTEED he would go broke. If not on that trade, some other trade. I know you think well of him but IMHO the guy is a joke.

    • http://dissertationtoday.com/research_proposal research proposal

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    • http://dissertationtoday.com/research_proposal research proposal

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  • http://fundmymutualfund.com TraderMark

    To your point in the 2nd to last paragraph here is a firm that is 12 weeks old and was sold to Yahoo for $20M+ (supposedly!)

    http://www.fundmymutualfund.com/2011/04/social-networking-bubbles-continues-to.html

    • Meatbone9

      Trader Mark! Wow, they come out of the woodwork…first Roger and now you? Is seeking Alpha just moving to a new forum?

    • Meatbone9

      Trader Mark! Wow, they come out of the woodwork…first Roger and now you? Is seeking Alpha just moving to a new forum?

      • http://fundmymutualfund.com TraderMark

        Followed James a long time, since his days at TheStreet.com – read this blog pretty regularly just don’t have much time to comment. Mostly I like to post random James Altucher references all over the internet since he spends 20% of his day searching for his name via twitter, google, and other search entities. ;)

      • http://fundmymutualfund.com TraderMark

        Followed James a long time, since his days at TheStreet.com – read this blog pretty regularly just don’t have much time to comment. Mostly I like to post random James Altucher references all over the internet since he spends 20% of his day searching for his name via twitter, google, and other search entities. ;)

  • http://fundmymutualfund.com TraderMark

    To your point in the 2nd to last paragraph here is a firm that is 12 weeks old and was sold to Yahoo for $20M+ (supposedly!)

    http://www.fundmymutualfund.com/2011/04/social-networking-bubbles-continues-to.html

  • Pinocchio

    That’s Great!! ” all the great investors go outside every day and they want to take your wallet, steal your diamonds, maybe rape you, and then after they’ve gotten everything they can get from you, they are going to shoot you in the head in front of your child and run off into the dark of the night.” It would be the next blockbuster’s movie

  • Pinocchio

    That’s Great!! ” all the great investors go outside every day and they want to take your wallet, steal your diamonds, maybe rape you, and then after they’ve gotten everything they can get from you, they are going to shoot you in the head in front of your child and run off into the dark of the night.” It would be the next blockbuster’s movie

  • http://www.timothysykes.com Anonymous

    Funny you mention stocks going up 10,000%, LEXG has done that this month alone :)

    • zzen321

      I’m sure you know it’s an alleged fraud.

    • zzen321

      I’m sure you know it’s an alleged fraud.

  • http://www.timothysykes.com Anonymous

    Funny you mention stocks going up 10,000%, LEXG has done that this month alone :)

  • Tim

    James,

    I can’t agree with all your points but a few comments:

    For the average guy (me) prudent investing has a lot to offer. I think you can afford to take some risks investing when you are in your 20’s and 30’s as you have time to recover. As you age, you scale down your risks as your time horizon does not allow recovery. I am a self taught investor. Quite a few things about the stock market, to me, just look like gambling. Whether it is trading on margin, day trading, etc. This to me looks like betting on sports from a risk standpoint.

    I think if you diversify, invest the substantial amount of your funds in large, international companies that pay dividends, you can make very good gains over the long haul.

    I only “risk” 10% of my investments in trying to pick stocks that will greatly appreciate. The rest is in the stocks I mention above, they are gaining 8 to 9% per year, mostly in dividends. The speculative picks were up 58% last year. Obviously the 2008 period was painful, but I recovered all my losses and an way ahead at this point.

    I don’t know where else I could make the returns I will need when I retire if not from the stock market. Fixed income is a bust. I do eventually plan to work for myself, but I need income to support that transition!

    Tim

    • Zulich

      First~ Why does risk have to be involved at all at any age? That is a failed system~ risk.. The word diversify is all about spread the risk of losing…I agree with the 10% but even that does not have to be a risk… Your growth of 8 to 9%… that is interesting cause in reality there are several factors that will eat away at that.. capital gains and inflation… so in reality your net gains are more like 4 to 5%… and those gains are only linear not compounding… very few get 20 years of growth, very few get away without some type of loss… I think that is great you got it all back but what we miss when saying this is the 2 or 3 years it took to get back to square one… that is not a gain. See it is not about the gains we need to control.. it is the losses. Think of it this way: If I have 10k in the market and lose 25%, I lose 2500 dollars~ So now that I am starting with 7500 in the market for the next year~ what percent of increase do I need to get back to 10k?? If you said 25% then you missed the math.. it will take 34% to get back to 10k. Ok, another lesson on math~ if I have 10k and lose 50% and now I am sitting at 5k.. what is the percentage needed to get back to 10k? 100% increase of your money… we are being lied to regarding the market.. I understand that some people do well and congrats for them but for the rest of us.. We can no longer risk our money for now or the future(retirement) or the legacy we leave behind… there is another way that I help my clients with their personal economy, guaranteed retirement and guaranteed legacy to move the next generation the right way. What I teach helps change multi-generations to change the mindset that we have to risk our money. We all work hard for our money, it is time to teach people how their money can work hard for them in a guaranteed safe vehicle… This is not something I take lightly! My life’s passion to to change peoples mindset regarding money and cashflow… You see we know how to earn it, but we don’t know how to keep it or cashflow it(compound it, grow it) …
      I know and expect to be criticized in what I am saying.. but this is what I will say~ You don’t know what you don’t know! If your were going down the road making good time to your destination and realized you were going in the wrong direction… when would you turn around? right away.. the same goes for what we have been taught in regards to the market…..
      Have a good one!

      • CHITTARANJAN

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  • Tim

    James,

    I can’t agree with all your points but a few comments:

    For the average guy (me) prudent investing has a lot to offer. I think you can afford to take some risks investing when you are in your 20’s and 30’s as you have time to recover. As you age, you scale down your risks as your time horizon does not allow recovery. I am a self taught investor. Quite a few things about the stock market, to me, just look like gambling. Whether it is trading on margin, day trading, etc. This to me looks like betting on sports from a risk standpoint.

    I think if you diversify, invest the substantial amount of your funds in large, international companies that pay dividends, you can make very good gains over the long haul.

    I only “risk” 10% of my investments in trying to pick stocks that will greatly appreciate. The rest is in the stocks I mention above, they are gaining 8 to 9% per year, mostly in dividends. The speculative picks were up 58% last year. Obviously the 2008 period was painful, but I recovered all my losses and an way ahead at this point.

    I don’t know where else I could make the returns I will need when I retire if not from the stock market. Fixed income is a bust. I do eventually plan to work for myself, but I need income to support that transition!

    Tim

  • North

    It is a rare occasion, but I fully agree with you this time.

    I pulled everything out of securities in 2006 and started buying distressed, multi-unit apartment buildings in middle-class neighborhoods. I am up to my fifth multi-unit building and have paid less than $18,000 ca$h for each (the least expensive being $4,500). Rehabilitation typically runs 18 months at a cost of $15K to $30K, also all ca$h. I’ve found that material suppliers and contractors are willing to work with you very effectively for ca$h, usually at a nice discount (30% – 50%).

    Tenants pay all utilities and I target monthly rent to be under $600 (giving discount for cash). Since I have a corporate job, my annual net income (not revenue) from residential rentals is re-invested in new buildings. After 5 years, my rental income is just about equivalent to my professional income.

    Find what you love to do, where you excel, and invest in yourself.

    Fuck Warren Buffet. He’s screwed me twice. Once on Fruit of the Loom stock and a second time on Burlington railroad.

    • Jack

      You screwed yourself. Whenever u blame someone else for what u do, there’s something wrong with you. Get a job and get out of the market if you’re going to do what other people advise.

  • North

    It is a rare occasion, but I fully agree with you this time.

    I pulled everything out of securities in 2006 and started buying distressed, multi-unit apartment buildings in middle-class neighborhoods. I am up to my fifth multi-unit building and have paid less than $18,000 ca$h for each (the least expensive being $4,500). Rehabilitation typically runs 18 months at a cost of $15K to $30K, also all ca$h. I’ve found that material suppliers and contractors are willing to work with you very effectively for ca$h, usually at a nice discount (30% – 50%).

    Tenants pay all utilities and I target monthly rent to be under $600 (giving discount for cash). Since I have a corporate job, my annual net income (not revenue) from residential rentals is re-invested in new buildings. After 5 years, my rental income is just about equivalent to my professional income.

    Find what you love to do, where you excel, and invest in yourself.

    Fuck Warren Buffet. He’s screwed me twice. Once on Fruit of the Loom stock and a second time on Burlington railroad.

  • Poik

    Whatta waste of time reading this.

    • NM

      amen

    • Peter

      Honestly though

  • Poik

    Whatta waste of time reading this.

  • http://www.nwcarz.com/ ThetaGuy

    I LOVE THIS POST. And I share your “biggest regret in life” in http://www.jamesaltucher.com/2010/11/8-reasons-not-to-daytrade/

    Keep up the a-m-a-z-i-n-g writing!

  • http://www.nwcarz.com/ ThetaGuy

    I LOVE THIS POST. And I share your “biggest regret in life” in http://www.jamesaltucher.com/2010/11/8-reasons-not-to-daytrade/

    Keep up the a-m-a-z-i-n-g writing!

  • Anonymous

    Here’s the thing: For most of us, owning individual stocks is not the answer. It’s not even the right question.

    The real question to ask yourself when seeking an investment for long term funds is: What asset class will grow to outpace inflation and taxes?

    Owning mutual funds that hold hold individual stocks (equities), however, is part of the answer. No one can accurately pick individual stock movements on a consistent basis. Even Warren Buffet has made mistakes. So, own mutual funds that own many companies at once. Some equities in your funds will appreciate and some will not, as in the past.

    I’ve seen many short term fluctuations in my equity mutual fund accounts in my 25 years of investment and I’ve learned one thing: I don’t know which way the next 40% swing will be, but I do know which way the next 100% swing will be.

    My thoughts and my optimism are my own, refined by many years of experience. My writing, however, is strongly influenced by Nick Murray. I strongly recommend that you read his book “Simple Wealth, Inevitable Wealth” and compare his thoughts with those of this blogger. Then, make your decisions.

    I have no financial interest in Mr. Murray, or in his book. My only financial interest is in seeing Americans become well educated in the areas of personal finance and investment. This will lift all of us.

    Still, if you decide to listen to the blogger above and run from equities, my mutual fund managers will be there, ready to buy them from you.

  • http://www.mortgageloanshop.net Qpost4

    I would own a few mutual funds that have low fees and pick momentum stocks with great growth prospects and evidence. It is not that hard, learn some charting and tech analysis and you’ll be OK. OR is it better to earn 0.50% c’mon.

    • http://wealthadviseruk.blogspot.com/ Gary_UK

      How’d they do for you through 2008-09?

      More of that come, much more, and much worse. Sell right now. Buy some gold.

      One day you will remember this advice and curse yourself (if you don’t sell & buy some gold).

  • http://www.mortgageloanshop.net Qpost4

    I would own a few mutual funds that have low fees and pick momentum stocks with great growth prospects and evidence. It is not that hard, learn some charting and tech analysis and you’ll be OK. OR is it better to earn 0.50% c’mon.

  • shortnotsilver

    Gold has risen 8% THIS MONTH and silver 28%.

    • http://www.redwooddesign.com Liske

      Silver is down 10% in one day tomorrow –

  • shortnotsilver

    Gold has risen 8% THIS MONTH and silver 28%.

  • Tbird

    The stock market has become an interest of mine lately and it has been a distraction for me at work. I made my first real bad trade this morning and this article provided a much needed pick-me-up and is eye-opening. I read your opinions on day-trading and laughed out loud. You are a wise man and I would agree that investing in yourself is much more fulfilling and may even be more profitable. I want to let you know that this article has made me have second thoughts about my investment strategy; no more staring at 1 min charts all day while at work. I think I am better off improving myself as a person instead of improving my account balances. Maybe I will learn how to create a website or try to improve my health, as I believe good health is a great investment. I will continue reading. Cheers.

  • Tbird

    The stock market has become an interest of mine lately and it has been a distraction for me at work. I made my first real bad trade this morning and this article provided a much needed pick-me-up and is eye-opening. I read your opinions on day-trading and laughed out loud. You are a wise man and I would agree that investing in yourself is much more fulfilling and may even be more profitable. I want to let you know that this article has made me have second thoughts about my investment strategy; no more staring at 1 min charts all day while at work. I think I am better off improving myself as a person instead of improving my account balances. Maybe I will learn how to create a website or try to improve my health, as I believe good health is a great investment. I will continue reading. Cheers.

  • Concrete Dovetail

    I think the stock market is kind of fun, because every second you get a result. I work in research (chemistry). Often times the results are grey. Is it real or an artifact. Need to repeat things multiple times. Often many things end up being ambiguous and shouldn’t be published. But in the stock, every second I get a clear result. Either I’m losing money or gaining money. No need to consult an expert on whether or not +5 cents is +5 cents. There’s closure. I’ve often thought if I would have invested all the time and energy I put into physical science into learning how to make money instead, I’d be better off. Anyways, would you hold or sell Citigroup? I hate the idea of a reverse split. I’m about to just dump it while I’m ahead.

    • Dicky_howard

      Hey Dovetail…I’m a chemist too…in big pharma for 10 years. I too wonder if I spend the time that I have spent learning chemistry learning the financial markets could I make a similar living.

      • Ian Ollmann

        I was a chemist. Computers were my hobby — very reproducible and like you I craved that.

        After a promising start with Ph.D. from Scripps Research Inst. and postdoc at Caltech, I worked exactly on year in med chem industry before I left. I got a micromanaging new boss who knew little and just wanted to waste my time with stuff that wasn’t going to work. So I left.

        To join Apple, to program computers, and it has been gravy (and to the most part reproducibility) ever since!

        • Dick

          Sounds like a great move leaving the industry after only 1 year. The industry has a tendency to suck you in, and before you know it, years have gone by, you realize you don’t really like it as much anymore, and complacency sets in. The pay is good also and that makes it even more difficult to change direction because chemistry is such a highly specialized skill. I got my BS in chemistry and went right to industry, quickly working my way up to entry PhD level. Now, there is really no more room for growth. That’s why I’m really getting into the markets now. It’s a small world and I’ve known many people who went to Scripts for PhD’s and post-docs. If you’d like to chat further you can email at dicky_howard at yahoo.

  • pjc

    Telling people under the age of 40 to invest in themselves makes sense.

    But, at some point you’re supposed to invest, and let the money work for you, and chillax a bit. Not quit necessarily, but maybe downshift, not work quite so hard, spend less time hustling at work and more time on your hobbies.

    If you don’t put your money in stocks, and you don’t put it in real estate (houses being the easiest to buy), then your chance of getting a decent return on your money is exactly zero.

    If you spread it around – a lot of different stocks (vanguard ETFs) and a couple of different houses, then at least you’ve got a shot at some financial stability.

    Sorry James, but at some point you’re no longer giving good advice, and just messing with people’s heads. People age. Not everyone wants to charge hard like Warren Buffet at age 80.

    Most people want their careers to have some sort of arc. Sure retiring at 40 is a stupid goal. But downshifting / trading money for fun is natural as you age. Without some sort of decent investment portfolio to back you up, that just won’t happen.

    • Zulich

      So what you are saying is that we should risk .. who says we should invest? That is a cliche… Most people have no clue and what we are really saying is that lets bat against the house and see if we will win.. I mean we are bound to win at some point.. No way!! Foolish thinking.. A very small percentage of your portfolio should go to stocks~ the part you don’t mind losing. People need safe vehicles.. people need to understand the flow of money.. they need to understand that there are more leaks in the financial bucket and that there is a better way to close those leaks and actaully make money on the money you pat to taxes, cars, interest, etc…. With all the complexities of the market do you really think people should risk anything…?? Come on lets get real.. Your thinking is old and needs to be updated… there is a reason why only 1% of this country is wealthy… If the stock market has an over return over the past 10, 20, 30 years of 10% then why aren’t people wealthy… even if you win in the stock market you lose~ paying the taxes sometimes will eat 20 to 30 to 40% of your gains.. back at it once again… If over the past 20 years you could have recouped even just a portion of monies paid to principal and interest to lending companies.. where would you be today… Now if you want to play in the market, have fun but realize and know that you could lose it all… or you could win… We teach a concept that guarantees your retirement with double digit returns and even triple digit if you start soon enough or have the capital to start with… The stock market was never intended for the masses just the few…

      • Anonymous

        If you do not buy individual stocks, but instead buy the most diversified index funds, there is no chance that you will lose all your money (except in some crazy circumstance like global nuclear war, or the abolition of private property rights in the US, in which case your cash and bonds won’t give you much protection, either).  

        There is no way to store your wealth without taking some sort of risk. If you hold cash, your risk is that inflation will destroy the purchasing power of it before you no longer need it.  Your chances of maximizing your spending power in retirement are highest if you invest in stocks rather than bonds or cash, as long as you don’t panic and sell them when they go down and then rush to buy them back when they go up.

    • Zulich

      So what you are saying is that we should risk .. who says we should invest? That is a cliche… Most people have no clue and what we are really saying is that lets bat against the house and see if we will win.. I mean we are bound to win at some point.. No way!! Foolish thinking.. A very small percentage of your portfolio should go to stocks~ the part you don’t mind losing. People need safe vehicles.. people need to understand the flow of money.. they need to understand that there are more leaks in the financial bucket and that there is a better way to close those leaks and actaully make money on the money you pat to taxes, cars, interest, etc…. With all the complexities of the market do you really think people should risk anything…?? Come on lets get real.. Your thinking is old and needs to be updated… there is a reason why only 1% of this country is wealthy… If the stock market has an over return over the past 10, 20, 30 years of 10% then why aren’t people wealthy… even if you win in the stock market you lose~ paying the taxes sometimes will eat 20 to 30 to 40% of your gains.. back at it once again… If over the past 20 years you could have recouped even just a portion of monies paid to principal and interest to lending companies.. where would you be today… Now if you want to play in the market, have fun but realize and know that you could lose it all… or you could win… We teach a concept that guarantees your retirement with double digit returns and even triple digit if you start soon enough or have the capital to start with… The stock market was never intended for the masses just the few…

    • RS

      trading money for fun is natural as you age…maybe for you but it doesn’t interest me at all.  Isn’t it amazing that we think the vast majority of people are just like us, without any proof of that, we still believe it.  

  • Mitch Walker

    I completely agree with your post. Follow this logic for a moment. Assuming that if you pulled someone off the street they would have the uncanny ability to loose money and buy high and sell low, right? They will do everything but be good at trading stocks. So why not conduct a social experiment and pull 10 novices off the street and pay them to start paper trading — then concurrently trade real money just doing the exact opposite of what they are doing. Buying when they sell and vice versa. Amirite??

    • Wcurl25

      They already did sort of . . . they were called the turtle traders.

      • MKC

        Didn’t the turtle traders work for Richard Dennis?

        • Wcurl25

          Yes they did work for Richard Dennis based and William Eckfardt, at least the way it is told in the book “Way of the Turtle” based on a bet between the two that they could recruit ordinary people off the streets from all different backgrounds of life with no prior trading experience and teach them how to be extraordinary traders.

          I guess my point in the previous comment was that these were ordinary people who had been pulled off the street; out of 1,000 applicants only 40 were interviewed and then 23 chosen. There were people in the group that made a lot of money and ones that lost a lot of money;particularly the ones that couldn’t adhere to simple rules (as most of us have trouble doing because we are convinced we know better).

    • Bidigital

      Mitch, your wisdom comes to you decades before it MAY for most. Wow. Sharp, Son, sharp in a field of comments written by thoughtful, articulate people I am happy to spend time investing my attention…

  • Ronald Ryes

    I have been enlightened. Thanks, Jim!

  • Ronald Ryes

    I have been enlightened. Thanks, Jim!

  • UraniumC

    Well said, James. This is maybe the best thing I’ve yet to read on the subject.

    here’s my 2-cents:

    as mentioned elsewhere in the comments, at a certain point you’re going to have to invest what you’ve earned, and that comes down to indexing vs. active management. Yours or some fund manager’s.

    Always a fascinating debate and I’ve been on both sides of it at various times in my 60 years. For a very long time I laughed at the indexers. I made all of the arguments and then some.

    After all, if you just avoided the obvious dogs you’d do better than average, right? Who would be stupid enough to own GM a couple of years ago? Or Ford? Opps. Better forget about Ford. Hindsight is a beautiful and perfect thing.

    I even took a major pay cut to join an investment research firm mid-career. There I was surrounded by exceedingly bright people. Each focused on one, maybe two industries and perhaps 6-10 stocks. More than one was honored in the trade press as “Analyst of the Year” for their work.

    They knew each of these companies inside and out. They knew the top executives. They knew the middle-managers and the front line people. They knew the customers. They spoke to all of them weekly. Sometimes daily.

    They didn’t get info before everyone else (that’s insider trading and illegal, and common). But they did know exactly when and how the info would be released, as did every other competent analyst around the world. Any new information was reflected in the stock price within minutes.

    They issued reports our institutional investor clients paid dearly for in soft dollars. And yet, predicting stock performance remained frustratingly elusive.

    If you’ve worked in a publicly traded corporation it is not hard to see why. The CEO and CFO work with internal forecasts from their teams. The process looks something like this:

    Salespeople are required to forecast what their customers will spend. Since these buys are rarely locked in far in advance, and can be cancelled anytime, nothing is certain. Add to this all the pending business that may or may not come to fruition and basically you are asking the field salesperson to predict the future. So, of course, they take a guess.

    These guesses get passed on to their managers, who now have their own forecasts and decisions to make. Do I take these sales forecasts at face value? Do I adjust them based on knowing Suzy is an optimist and Harry always sees dark clouds? So, of course, they take a guess and pass it on to the next layer of management.

    So it goes until all these guesses are consolidated into the nicely packaged budget/forecast binders presented to top management. More often than not, after one look, they’ll say: “This is unacceptable. We can’t present this forecast to Wall Street. Go back and revise these numbers.” Back down the chain it goes. Maybe multiple times, and each time the numbers get a bit further from reality.

    Now predicting the future is a dicey proposition for even the most gifted psychics, and they are not burdened with this process.

    Suddenly my enormous hubris was clear. Somehow reading a few books and 10ks was going to give me an edge? Over not only the professional analysts who lived a breathed this stuff all day every day, but also the executives that ran the companies in question? I could succeed where they could not?

    Suddenly I realized why even rock star fund managers find it almost impossible to best the simple index over time.

    There is a reason names like Buffet and Lynch are so revered and well known. There are also reasons more fortunes have been made brokering trades than making them.

    That’s why I’m an indexer. If you choose to try to best the averages, God Bless and God Speed. You may well be smarter and more talented than I. You are most certainly likely to be better looking. I’ll look for your name along with Warren and Peter’s in the not too distant future.

    I extend the same to all those folks I’ve met in Vegas who assure me they have bested the house. I listen, gaze up at the billion dollar casinos and reflect on how many smarter, more talented and better looking people there are than me.

    • Nick Shadow

       I have been furnishing the those forecasts in the high tech world for about 35 years.  You have a marvelous insight into the process. It goes like this on the second round, “So the first number wasn’t good enough?” “No, management needs more.”  “Fine, I am going to dig up the rose garden now, I am sure it is in there somewhere.” “I am dumb, should have looked there first, here it is, all good now!”

    • Anonymous

      Uranium, what do you or did you do for work once you decided that the investment research firm was not for you?

    • Searx

      Great post! i was in the business & you succinctly stated what took me decades & a lot of money to finally understand.

      What even makes the odds worse for the small investor is the revolving door between wall st. & the govt.

      it’s a crooked casino for sure & not even any free drinks.

  • Bobby

    A well balanced portfolio of index funds, into which you invest a fixed amount every month regardless of the conditions of the market, would fix a lot of the problems you address in the article. That’s what i do at least.

  • the plumber

    lol, jim i like it,, but im still gonna trade,,the real story is dont buy papers, or reports, suscribe to that guy who knows the inside trade, there is know get rich quick scheem,,i do my own homework,,,if the guys were that good and positive on there picks,,why not just buy the stock there tellin u about instead of charging 79.00, 100, 1000, a month or year,,i look for volume spikes, oversold condotions, the mkt seems to overreact to everthing, i scour the new every morning to see if anyone missed something,, i watch out for pump in dumps, my latest opps was lexg,,,,that was a volume spike that made me look , i was in at 3.8 and out at 5.15,,,it went to 10ish before getting crushed to 3.71, this was a pump in dump, people just kept buying it finally getting crushed by there own greed,,,

  • Kjp712

    Trading stocks as your own business still beats working for someone else by a longshot.No more ubiquitous meetings,we do not need you anymore speeches,or pompous talking about how smart the Boss is.Even when everyone knows the Boss’s father built the company from the Foundation and ” Junior” is now only steering the ship trying to avoid the bankruptcy rocks on the shore.While you may never beat Stevie Cohen at the stock trading game,with some success you will never have to work for him or anyone else the rest of your life.That is the goal of working nirvana.

    • Bidigital

      Amen to you, sir.

  • Shawgi abadir

    i think you should be commited to a mental inistitution .youe article is so out of touch with real world.

  • Anonymous

    108 million iphones have been sold and 50 million of these are now being sold used. Apple becomes a victim of their own success with a lack of dependent software. Stop making widgets better and start focusing on media and content. Disney?

    • flamingids

      Wow. Great statistics! Iphone had gone down

  • Shmuel

    Nine out of ten CAN be above average; exactly five out of ten are above median, however.

    • Thrymr

      Unfortunately, if Warren Buffet and Bill Gates are included in the pool, it’s more likely that 9 out of 10 are below average.

  • http://www.nektra.com Sebastian Wain

    You’re right, but when you look at MSFT with P/E ~= 11 and other indicators, they are not doing well on the web/mobile/cloud space but MSFT always failed a lot of times before gaining market and that can happen in 5 yr term. Then I believe this can be a good and contrarian bet.

    On AAPL, in the end they will need to add teleportation to their mobile phones to keep with the hype and be the first trillion dollar company :-)

    • http://twitter.com/TiantongQ Tiantong Qin

      If they add teleportation they would be a quadrillion dollar company

    • RAK

      I consider myself a novice investor though I have been doing it for around 20 years and have not ever lost much. I don’t understand comments like this at all. The MSFT, INTC and BRK.B portions of my portfolio are doing fine. I could say I regret not buying more but that would go against my diversification *belief*. But I do believe if you have a lot of moneys in diversified stocks and/or balanced funds that some of that money *might* do well some of the time! And if I have a lot of money and am gaining 7% always that would be ok for me! I recently heard “Jack” Bogle has something like 80Million in Vanguard funds all invested from his career there and he is quite happy boasting around 6.5% return, I certainly could live with that!

  • http://wealthadviseruk.blogspot.com/ Gary_UK

    ‘And a trillion dollars in stimulus still hasn’t hit the economy. So I like stocks in general.’

    Readers, this is such a misleading statement. Even if you ONLY follow the mainstream media, you will be aware that there is no stimulus at present. You just have the Fed creating dollars out of thin air, doling it out to the banks, who have done their usual great job in speculating with it. The result? Check next time you fill up your car with gas. Or when you buy some food. Thank the Fed and your government for that.

    You’ve got negative GDP dead ahead.

    It’s sad to see the USA being financially rapes by the banking elite, sadder still to see this sort of drivel being peddled as ‘advice’.

  • Alex Filonov

    Completely wrong! Here’s my full response: http://muddlinginvestor.blogspot.com/2011/05/you-should-own-stocks-answer-to-james.html
    In short, market is exciting, fun to participate and makes you money. And yes, even 10% is much better that you can get anywhere else. And if you know how to make more than 15%, I doubt you are reading this…

  • http://pulse.yahoo.com/_2IGVKWB4TSEYGRHA2AZ7HYYWRQ Andrew

    Solid advice, if you really want to make money, either be the broker or be the source product (create something). The rest of the people are what the brokers and sourcers refer to as “the dumb money”.

    Wealth preservation is another matter; as mentioned, hard assets like gold/silver and rental income from productive land assets are the standard methodologies for multi-generationally wealthy families.

  • http://profiles.google.com/madon.zubin Zubin Madon

    In his book “The Black Swan”, Naseem Taleb states exactly what you have written in point number 6. Its an insightful book.

  • Stoneteeth

       Brilliant article

  • UraniumC

    thanks, Nick….
     
    I’ve been on both sides of the process.  back in the late 90s I was group publisher for some tech mags.  In 2000 we blew the doors off and collected big bonuses.
     
    I could see the storm clouds forming as I was preparing the budgets for ’01.  certainly didn’t see the perfect storm it turned out to be.
     
    anyway, coming off that record year I forcasted a flat 2001.  my divesion pres took one look and said we can’t take that to the board after the year you had.  you’ve got to be more aggressive.
     
    this is agressive, says I, given what I see developing in the market.  we likely won’t hit even flat.
     
    still, you need to come back with better.
     
    We have to decide.  are you asking for my best forcast as to what I see us delivering?  Or do you just want a specific percent increase.  ’cause if that’s the case, I can enter any numbers we want….
     
    and guess what we did? 

  • UraniumC

    thanks, Nick….
     
    I’ve been on both sides of the process.  back in the late 90s I was group publisher for some tech mags.  In 2000 we blew the doors off and collected big bonuses.
     
    I could see the storm clouds forming as I was preparing the budgets for ’01.  certainly didn’t see the perfect storm it turned out to be.
     
    anyway, coming off that record year I forcasted a flat 2001.  my divesion pres took one look and said we can’t take that to the board after the year you had.  you’ve got to be more aggressive.
     
    this is agressive, says I, given what I see developing in the market.  we likely won’t hit even flat.
     
    still, you need to come back with better.
     
    We have to decide.  are you asking for my best forcast as to what I see us delivering?  Or do you just want a specific percent increase.  ’cause if that’s the case, I can enter any numbers we want….
     
    and guess what we did? 

  • Anonymous

    “9 out of 10 people think they are an above average drive. 9 0ut of 10 people think they are an above average investor. Both are impossible”

    If 9/10 are good and 1/10 are really, really, really bad, then, yes, the 9/10 can all be above average.  Not impossible!

  • http://aburt.com Andrew Burt

    While your average Joe can’t expect to beat the market with their picks, they _can_ ride _with_ the market, for the long haul.  E.g. an index 500 fund.  Even with the recent mess, the S&P is still up an average of, what, 8% annually over the last 30 years.

    As for the advice that the way to avoid the risk of stocks is to take $50k and “start a company” — yikes!  I’ve started many — and, yes, been successful — and I just started another one — but you can also lose every dime of that $50k.  (Plus you’re probably now in debt from borrowing once the $50k ran out.)  Some huge percent of startups fail.  It takes more skill, sweat, and luck to make it with a startup than investing in stocks.  Especially if the point of the article is avoid stocks because they’re too risky.  Stocks are risky (index funds somewhat less so), but startups are immensely riskier.  Huge reward like that comes with equally huge risk.  Talk about needing luck!  And I think every other point made, about competition, etc, holds doubly so for the person starting a business.    Sorry, but that’s terrible, terrible, contradictory advice for the general public.

    • flamingids

      Thank you. Maybe stocks are the way to go! Starting a business needs startup capital and seems hard especially with the competition.

  • MsDreamy

    “If you have an extra $50,000 don’t put it into stocks. Put it into yourself.” Amen!!!
    Hi James, do you think the same goes for gold trade ?

  • WillF

    Invest in yourself is a loaded phrase. Taking care of your body, learning ect. These investments in yourself pay more in dividends than most trades. Another significant investment is in personality, outlook on life, ect. These things form a basis for a mindset that allows investing. Also, there’s really no point in news except for large market moving events to check your terrain. Otherwise, we move into a predictive mode, which may then lead to ego. I guess going with the flow is best, watching your exposures and managing as you go.

    I’m not sure there’s a point in scalping now, we can’t do nano seconds. 

  • http://www.worldwiderx.org Tsneds

    Man thanks for this,I will be printing this and giving it to my Dad for sure.

  • http://www.theciageny.com Mark

    You write. Many read. it’s a pleasure to find someone who has a way with words and ideas that simply makes both emotional and common sense. A rare gift indeed.

  • http://eelsecreto.com El Secreto

    Great post, still I’d add that most of the financial advisers, don’t rem but around 75% of them… those who charge thousands of dollars, have a master degree and couple of years in the field under perform the S&P500

  • Svg1234

    As a financial advisor for the past 25 years and an investor/trader for over 35, it is my opinion that there is a lot of truth in this article. Not all of it – but most of it. People are either a)ignorant of the reality (I believe this is the majority), or b)choose to ignore it. Those who have or will do better than most miss the point. They got lucky. It wasn’t your intelligence, your great research, your super-duper custom technical indicator, etc. It was just dumb luck, but those who do well in the market just can’t bring themselves to believe this truth. The vast majority of individuals have zero business choosing stocks themselves. This they also cannot accept. People just want to believe in fiction. They absolutely refuse to believe the truth about this rigged game. When I share some truths with a few of my more enlightened clients – they still can’t handle it. They just want to believe that I know something they don’t. Totally baffles me.

    So what do I do? Well, despite knowing the realities of Wall St. and the markets, I still choose to trade now and then (mostly option spreads – limited risk/limited reward). Why? Simply because I enjoy it. Keeps me out of trouble. lol. I’m not trying to beat any average or index. Most years I’ve done well enough, some years I lose money. I don’t care. Anywhere from 0 to about 50 years from now I’ll be dead – the money won’t matter. I take a very “philosophical” approach. I do my best to not buy into all the nonsense (the “talkers”). I shut them out. I don’t listen to anyone else on this subject. There’s no need to. They are either liars, con artists, or incredibly ignorant. I have no need for them. The game is what it is. When I make money, or a guess (prediction) turns out to be correct, I refuse to buy into thinking I’m a genius or I knew something others did not. When I lose or when I’m wrong, I don’t beat myself up for it. I accept the randomness and the luck, along with the corruption, etc. I accept that I am powerless and have no control. I accept that I am up against people who have far more of everything needed to win. I do my best to not fool myself (though I’m human, and sometimes I get caught up in the BS before realizing it and re-centering).

    • Deep Sea Elvis

      Thank you. Just what I needed to hear.

    • Jack

      I’m with u 100%.

  • Cash Vegas

    As cliche as it may sound, your best investment is yourself.  Seriously, there is no more likely business than your own where you can better gauge or produce ROI and ROE.  I know many business owners that are generating 25%, 50%, 100%, and greater returns every year on the capital that they have invested in their business.  The reason for such outstanding ROI’s is that they diligently work the business everyday, and thus drive their investment in the direction it needs to go. 

    With that being said, I will share a few key principles that I like to employ (whether in stock investing or general business dealings):

    1. Know (extremely well) what you are buying, and pay substantially less than what it is worth.  Or, as I am sometimes fond of saying, “If you ain’t stealing it, don’t buy it”.

    2. Concentration – nobody ever got rich by diversifying in mutual funds.  If you look at the list of self-made rich people on the Forbes 400 list, you will see that nearly all of their wealth came from one primary venture.

    3. Stock prices usually move in spurts (whether up or down); stocks spend long periods of time doing nothing, interrupted only by brief periods of panic or elation.  Never feel like you have to be invested at all times.  Be OK with sitting in cash, and only taking action when it makes sense.

    – Cash Vegas
    http://moneyandsex.wordpress.com

  • http://statspotting.com Statspotting

    you assume it is a zero sum game. its very close, but it is not.

  • Laughing and nodding

    I love your writing style. Accessible, easy, loping stride. And as a hack who has seen a few up and down cycles, words of wisdom I can only chuckle at.

  • http://www.facebook.com/people/Erik-Corr/100002915722983 Erik Corr

    What people really need to do is sell high and buy low. When the market tanked I bought and when it rallied a few months ago I sold. Not easy to do. And keep it simple. By the way QE3 is coming and when it does gold will go up just ask Kyle Bass.

  • http://www.manhattancalumet.com/ Dennis The Menace

    I would like to propose an alternative to stocksTheir are now over fifty single country funds available and maybe over 100 narrow sectors like airlines steel solar so why the concern for the nasdaq or the standard and poor five hunderd each one of these countries and sectors is a index of and by itself. The solar exchange traded fund {TAN} is now down 90% from its high in 2007. If I were an investor or trader. I would simply look for any exchange traded fund or closed end fund that does not use any leverage in their portfolios and start buying after their is a 75% decline from its all time high’ and than buy twice as much if that exchange traded fund or closed end fund declines another five percent an 80% decline from its all time high’ buy twice as much at a 85% decline from its all time high buy twice as much at a 90% decline from its all time high’ and finally buy twice as much at a 95% decline from its all time high. Now I know that some of these funds will not decline 90% from their all time highs maybe not even 80%. Another thing that you might be wondering about I would run out of money If I followed that method right wrong. Example take one hundred thousand dollars. Buy 500 dollars of xyz fund at 25 dollars off 75% from its all time high of 100 dollars. Buy 1000 dollars of xyz at 20 dollars off 80% from its all time high of 100 dollars. Buy 2000 dollars of xyz at 15 dollars off 85% from its all time high of 100 dollars Buy 4000 dollars of xyz at 10 dollars off 90% from its all ltime high and finally Buy 8000 dollars of xyz at 5 dollars off 95% from its all time high for a total of 15500 about 15 percent of total cash assets. I am giving an example here the actual investment amount for an exchange traded fund or closed end fund that you are investing in would be the percentage of cash in the account not the percentage of both equities and cash combined.. The investment percentage for each fund would be based on the cash portion of your total portfolio at any given moment in time simply because the dollar amount of cash in the account would change fairly often, So if you have 40% of your portifolio in cash you would use that as your basis for determining your allocation not the total value of both cash and equities. The idea is to have your biggest positions in the funds that have declined the most and the smallest positions in the funds that have declined the least. Also keep in mind when you buy an exchange traded fund you are buying a basket of stocks so the fund cannot go to zero unlike a stock.Than when any fund has regained three quarters of its value that would be 75 dollars in the case of eyz use a 10% trailing stop loss to protect your gains. Who knows you may sell out of the fund with in 90% of its all time high. And their you have it a simple but brilliant strategy. Also keep in mind that you will have tremendous diversification using this method which would mean you could easily employ some leverage in the form of buying on margin. Even without margin I believe that this could be one of the greastest investment methods of all time you will be almost assured of crushing the performance of the standard and poors five hundred. The.Only thing that could change this outcome would be a great worldwide depression.

  • Maggie

    Hello James,

    Seriously, you are obsessed with being rich. Or is it competitive. You sound like my brother and my best friend. They both have considerable skills and can make a good living outside of speculation and trading but they insist on trying to make it in stocks or currency trading or commodities.

    I invest in stocks hoping to make a modest return on a portion of my savings just to have a little “pin money”. I have realized gains (Yea!) and unrealized gains and losses and luckily, so far, I’m able to sit on the unrealized losses for at least two years. I’m not rich but my bottom line is in the green. Maybe I’m the loser.

  • QuietJim

    My wife tells me that Chobani yogurt cured her IBS. I guess, her attacks seemed pretty severe and now they’re gone. I think she just outlived it, interestingly though the A&P near my house can’t keep that stuff on the shelves.
    You’re right about that one stock theory. In the early 80’s a guy where I worked saved 100$ a payday until he had 40K. Then he put it all into a drug stock at 18$ a share. I think his stock broker wanted to beat him up because of stupidity. This was around ’82. Took around 10 years or so to go over a couple million. If he still has it probably worth between 5 and 10 mil. Good for him.

  • Artie Cab

    I traded the market from 1975 to 2011.  Over that period of time, I made some money and spent it but finally lost it all. (I only remember the stocks I made money on.)   Now I’m broke except for $1,824 bucks a month in SS.  I traded stocks and options every way possible and bought all the books.  In the late 90’s when all you had to do was look at a stock on a website and then hit “buy” and made money.   I thought I was brilliant.  Actually, I was one of many of the world’s biggest a——-.  Now I have enough to live on in a middle class house on a lake in FL and am happy as a pig eating s—.  So all you idiots out there who think they can beat the market, listen to James and better to put your money in your own self made business, no matter what it is, than waste it trading.  Even if your business fails, those bastards on Wall Street won’t take it from you.  Trading is thrilling, especially when you’re winning but the depression when you’re losing is second to none.  If you trade stocks, options and especially futures, you’re all fish at the poker table.

  • lol

    lol, you’re one dumb mother fucker.  that’s why you suck at trading.  why do you think there are more millionaires in the US now than ever?  Since they know how to trade… not from starting companies but from actively trading…  Too bad you aren’t smart enough to do that and need to rely on writing shitty blogs on the internet… lol

    • artiecab@aol.com

      You’re the ODMF! The millionaires and billionaires are the CEO’s of all the big companies and banks. Come out of your hole and join the real world.

      • fred

        LOL……you have an AOL account!!! hahahahaha

  • eric

    James, I agree, but I was reading your recent article surrounding the Vringo/Goog patent infringment case, and if Vringo turns out to be the so called “Black Swan”, and $60.00 is a target price, does your above article premis suggest that wall street manipulators would never allow such a run to happen? I lost a bunch years ago on stocks that for all intensive purposes, should have gone up.
    Thanks for your writings.
    Eric

  • Dur

    Rofl this article sucked. What a lofty, pretentious tone.

  • ……..

    LOL!!! WTF are talking about. Study and geet money. If u dont study what do you expect ugh…

  • brett

    These points are awful! If anything, you’ve convinced me that there is more reason to buy stocks. ‘Stocks are really boring’ is not a great reason. I feel as though you’ve written this out of spite because you have a history of making poor investments. This has very weak statistical induction and is completely ignorant/bias.

  • frank kolnacki

    No doubt, everybody can’t be a great trader. Most obviously fail. Look at the positive side rather than the negative. What you put into it, in time, education and desire, is what you will get out of it. Skepticism is good but don’t let anyone ever tell you that you can’t do something just because THEY can’t.

  • miKtastic

    I found this entertaining to read for whatever reason. I have invested in stock through an ESPP but I clearly have no clue what I’m doing with it… it just sits there :-) however, my percentage of investment is so low anything it earns is potential profit over a few years time – it will either break even or make mega bucks in 20 years LOL – thanks for writing I enjoyed

  • Joe

    Pick your sell point and if it hits it sell it and don’t buy it back. Keep your losses SMALL.

  • Joe

    It’s not as hard as he makes it out to be, but the average person spends more time researching what TV set or car buy than they do stocks. It’s a job, nothing less and nothing more. Garbage In – Garbage out. You’ve got to put in the time. Then sell quick if it doesn’t go your way. Either that or understand how options work.

  • Joe

    Right now everyone’s a genius. It’s easy to be a genius when the Fed has a blow torch on the economy. If anyone thinks this is “real” they’re clueless.

  • dan

    the only thing i have to say is you didnt really tell us what else to do there has to be a way to make some money out there. a lot of people do it. some people are just born into it i wish i was lol but then i wouldnt be the hard working young man i am today either but i would like to see what i can do to make money off my money i mean why not?

  • Van

    Could you please be so kind as to put a published date on the articles.

    • http://josepaulmartin.com/ Jose Paul Martin

      Look at the url

  • Ramish

    You’re pretty stupid.

  • whs

    Everyone else must be an idiot because i trippled my money in the stock market

  • Theone

    Everything in this is not true. Exempt about the 15 -20% earnings per year. I trade with scottrade and when I researched scottrade ther was about 20 people saying its the worst, but it wasn’t. So those guys were mad at the only thing they could be mad at and so is James. And by the way stock mostly isn’t a get rich fast! Thing especially if you are investing long term

  • Theone

    You guys just got a little money and lost all/most of it and now your blaming the only thing that you can think of .

  • sk

    this is just point blank truth and nothing else..

  • http://www.zitmaxx.eu/banken/loungebanken/p_1_50/banken-bankstel Loungebanken

    They then pay for high speed cables to go right into these exchanges so their trades get their before yours. These guys make a lot of money in the markets by getting in the middle of every bid-ask faster than anyone else can. Its a race to the bottom but billions are made.

  • anon

    “be greedy when others are fearful, be fearful when others are greedy” -warren Buffet 3rd richest man in the world.
    I think you’ve done the other way around. I pity you James.

  • Olav

    You’re retarded. You obviously know nothing about what you’re talking about. I’m not even going to spend my time explaining. So much money can and will be made whether the stocks go up level out or down. I’ll be one of them… There & here, doing just that. Making money regardless. Enjoy your poor uneducated life, because you deserve nothing more or less.

  • Monkey

    Only one thing I disagree with Jim on in this article: The implication that all the advantages he supposes “professional investors” have – such as those high-speed cables to make trades faster- actually lead to better results. The record of all managers – inclduing hedge funds- doesn’t support it. In fact, we can say just the opposite: all of the advantages that professional investors have lead to lower returns than index and ETF benchmarks.

  • Michelle Walker

    Dear, I don’t agree with your views, written in this ten points which are express stocks are boring. I am a top stocksinvestor for many years and gaining much profit by investing my earnings in the stock market. Here, many companies and firms are available, which are giving us much profit on our investment

  • Anon47

    This article has so much personal resentment for stocks, from seemingly negative experiences. There are still a ton of stocks that are about to explode, e.g Tesla! Ya’ll might want to look into some graphite/graphene stocks ;)

  • joe bob jankins

    Lol, funny writer.

    And you were quite accurate about some critical things. The stock market roared because trillions in stimulus hit and the ipad sold. Write on funny man

  • Paul

    Invest in index funds and don’t worry about picking the right stocks and beating the market. Investing is a marathon not a sprint. There’s a big difference between investing and speculating.

  • Stan

    author is retarded

  • Career Sidekick

    Stopped reading at point #2.

    1- I am pretty good at it (profitable, usually beating the S&P)
    2- who cares what the competition wants to do?? it’s an open market. I’m fine regardless of what other people are doing. If I’m smart I’ll observe what other people are doing and use it to my advantage, not complain about it and QUIT.

    Like most things, you aren’t going to make money if you don’t learn how to do it properly. If you don’t learn and develop a system, the stock market is the same as going to vegas. But if you do it right, it’s 100% different.

  • Sterling B.

    Good blog post (although i do not agree with it) I think however, we have no choice to trade stocks. As much as you might think that it is time to abandon this form of trade, it is unescapable. All major companies (that make this world go around) are traded. As well a stock changes on how us as humans like or dislike a product or company. As much as stocks are all traded electronically they do and always will have that human element engrained in there evaluations. I respect your opinions and enjoyed hearing another persons feeling on that matter.
    All the reasons that you gave in post about why we should never own stocks again, is really what make trading stock so much fun. Whether is working hard and learning and researching how to become stronger in the field. Who doesn’t love that cutthroat competition, and dont forget it can go both ways. As much as the market wants to cut your throat in a back alley (i really liked that phrase by the way) there is no reason why you can’t be one step ahead and cut its throat back while you have your hand in his wallet. The stock market is a game, learn to play…. its all about strategy. and always remember, “all war is based in deception” -Sun Tzu

  • hi

    lol…idiot

  • Joe Smith

    I’m pretty sure most IBS suffers could cure their symptoms by not eating dairy products. Like myself, after many years of IBS, I finally figured out I was lactose intolerant, but there is no medical test for it, so your doctor won’t diagnose it!

  • Jason Jarrell

    sounds like you should not inviest, if your buying at the high and selling at teh lows. In 10yrs I’ve been tradding I’ve made about 80 trades, only 2 of them I actualy took a loss on ( afew hunderd dollars). My strategy is simple, if i can make around 8% gain I sell at that point. I’ve held some stocks a year or so. most I only need to hold 2, 4, 6 months till I can profit off that. I’ve doubled my investment in 10 yrs, not to shabby. I don’t try to buy a stock and watch it double in price b/c that’s just stupid. All stocks are constantly up and down, my goal is to take advantage of all those ups and downs and not be greedy. Works good.

  • mike smith

    So what do you do with the cash you’ve earned running a business all your life? Gold? Buy a farm in Uganda? I’m 50% in now, have been mostly 80% for thirty years and have done at least 25 to 30% over that time. But I realize I’m just along for the ride. I’m not fully in anymore because the whole direction of western culture bothers me a little. I think of it like the sort of mathematically challenged kind of dumb guy I am. Boy, that coke was good! Think I’ll buy some stock. Love my ford explorer…………etc. I think I’m totally out of the loop, there are degrees of insider trading, and from 1 to 100 I’m a 2 ,but it’s the only game in town.

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  • Alstonalston

    The best way to take advantage of a booming stock market is to start a company. Because everything goes up. If you have an extra $50,000 don’t put it into stocks. Put it into yourself. You’ll make 10,000% on that instead of 5% per year Read More http://bit.ly/1hwsyrb

  • Ann

    ​You can got any more for real time data at http://www.goldstockz.com , etc stocks gold oil currency futures coal steel ….

  • Mary Hinge

    If the Stock Market was such a wonderful way of generating money, the ultra rich would be there in a flash, but they are not.

    So-called investments are little more than scams, since ‘investors’ use other people’s money and thus are immune from profit taking or collapse.
    The Stock Market is little more than a form of gambling, and we all know that the odds are stacked against you at any gambling house.

  • SnakeArbusto

    He’s probably already happier than you. Or are money and happiness identical to you?

  • Spencer

    I’m not going to debate the content of this article because not only is it overly opinionated and condescending, a lot of it is just flat out wrong. What I will say though is that this is just very poor quality writing. Regardless of what the author believes, they present it in a way that cannot be taken seriously. The entire article sounds like it was written by an angry teen who doesnt want anybody to trade stocks because they were burned by their own trading decisions. Your free to write your own opinions, just don’t forget that they are just your opinions, not fact, and probably not worth anyone’s time.

  • zoha

    I wish I had read this in 2010.I wouldn’t have lost more then 2 million rupees in stocks. I will never trade in stocks and I recommend to everyone same. All economic data and breaking news doesn’t make any sense. You may loose one day and on 2 and third you make profit. Again you loose at the end, you would be looser. Please dont’ loose your hard earned money in stock market. It is all a scam.

  • MBA Student

    You can indeed make a lot of money from stocks, and it’s useful to own them if you have some investing knowledge or background in business. The stock market isn’t some game you sign up for where they best players come and camp you all day, rather it is a platform for buying and selling stocks in companies you believe in. Stocks are basically ownership in companies, so saying you shouldn’t have faith in any companies in the world is ridiculous. Some companies will fail, and some will make a killing, but be sure you pick stocks from companies you think will be successful and you can make good returns.

  • monteboss

    It’s safer playing at the casino, indeed.

  • wayne

    stock investing is a bad idea for some people. and a good idea for others.if you lose money in stocks or even lose some in mutual funds and can’t sleep well that night after that happens then it’s a waste of time for you.whats right for you doesn’t always mean right thing to do for others.why banks have account managers to talk to you.

  • weewaa

    imma bet you also hate puppies and rainbows.

  • Matt

    So…when *are* you supposed to sell your stocks? I have a few I bought 7-8 years ago and have lost about 99.5% of their value. Its either I buy one and 6 months later its up 15% or its 3 years later and down 30%, never having gotten close to when I bought it. I have this stock I bought 8 years ago. I paid $850 for it, dropped to $50, recovered and right now I have a total gain of $9. Another I bought 9 years ago for $161, its worth 36 cents now.

  • Guest

    Hey James, how have your stocks been doing since you published this article?