Saturday, November 24, 2007

Stocks, truthful speculation.

Why do so many see stocks as a high risk investment? That is a I always seem to be asking myself.I think a good reason this speculation happens is some past experience of someone close to them losing a lot of money in the market. The basic rule that anyone who trades stocks is buy low sell high but people generally don't trust a stock until it appreciates in price and that is when everyone and their dog wants to purchase the stock. Ric Edelman calls this enronitis basically because everyone saw enron as a high performance company, that number 4 on he fortune 500 that could not be taken down. So, the more Enron appreciated the more people acquired the stock until one day boom everyone lost heir money because they all suddenly claimed bankruptcy.So in actuality you can deprive a couple of morals from this story which are the following; Don't put all your eggs in one basket meaning diversify by using a indexed security such as an ETF, and Buy low sell high meaning don't buy stock when it is in the paper as a mover or shaker, You should buy in its infancy stage and if the stock is mature look a long term growth which at least 5yrs. So people who usually make money on hot stocks are basically playing the lottery seeing it go from 15million to 50 million.


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