Dear Mr. Berko: I've read a few books on investing in the stock market, but they seem filled with useless information, boring example stories and futile formulas.
I have $166,000 in stocks — some good and some bad — but what I need are some hard and fast rules to guide me so that I can be more sure of myself when I buy, sell or consider stock.
I need to know if what I'm doing is right or wrong and how I can improve. Can you recommend a book for me, or can you give me some personal tips from your experience?
M.M., Springfield, Ill.
1. Contrary to popular opinion, there are no good how-to books on the stock market.
2. Penny stocks are for fools and dreamers.
3. Most people lie about their losses, and they really lie about their profits.
4. Join an investment club. They are excellent venues where you can learn about investing and meet like-minded people. Some investment clubs actually become big businesses.
5. Always be an investor and not a trader. Trading stocks is like betting on the ponies, and very few traders have enjoyed long-term success.
6. Learn and master the Rule of 72.
7. Almost every tout service (a service that deals in stock market advisory letters) lies through its teeth about its successes.
8. Most brokers will tell you the truth — but seldom the whole truth.
9. Overnight success in the stock market takes between four and seven years.
10. Losing money is a far less regrettable alternative than losing an opportunity.
11. Do not ascribe long-term consequences to short-term events.
12. Never try to hit home runs. Rather, build your portfolio with walks, singles and doubles.
13. Be mindful that a diversified portfolio is one of the most important ingredients to financial success.