Bad Stock Investments

In the late 1980’s Japan seemed set to take
over the world.

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The Japanese stock market was the envy of
the world and the Nikkei stock index was
around 39,000.


Today it is less than 10,000.


One of the bad stock investments of our
time would have been to buy a basket of
Japanese stocks twenty-four years ago and
hold them.


There are several types of bad stock
investments.


Holding dividend stocks that do not keep up
with inflation, falls in the bad stock
investments category.


Holding on to a stock that has run its course
in search of just a little more profit also falls
in the bad stocks investments category.


Here we look at
tactics, strategy, fundamental analysis, and
the efficient market to consider good and
bad stock investments.


What Goes around
Comes Around


This old proverb tells us that what we do one
day eventually comes back, often times to
haunt us.


We too often become victims of our own
thoughtlessness.


The major psychological drivers in the
market are fear and greed.


The twin demons lead to more bad stock
investments than all other reasons.


The best way to avoid falling prey to these
bugaboos is to study what you want to
invest in.


Proceed by degrees. Diversify your
investments in such a way as to avoid
putting all of our investment capital where
one set of factors could bankrupt you.


Take the long view of the stock market.


Consider the long view when investing in
gold.


Gold has rallied twice in the last forty years
and fallen back twice.


Consider practical approaches to investing
such as investing in beer.


People will always want a drink when the
market rallies and when it falls.


The time honored beverage has a wide
following and is a worldwide source of profit.


Think of what makes money in a rising
market and what makes money in a
recession.


Do your homework and do not just rely on
tips.


Self-Defeating
Strategy


In the late years of the 20th century Microsoft
bailed out Apple Computer. Apple went on to
invent hand held devices that have hurt the
Microsoft PC business.


This was a deal of money for patents
instead of money for stock but it still falls in
the bad stock investments category.


Microsoft or Mr. Gates privately, should have
required stock options in return for their
bailout money.


Then they would have prospered on the rise
of Apple to the corporation with the highest
capitalization in the world.


Instead Microsoft was concerned about
antitrust activities of the US government and
set its competitor on the path to dismantling
the Microsoft Empire.


The Efficient Market


It is a true story that a bunch of stock market
reporters threw darts at the stock pages one
day and tracked the stocks that the darts hit.


Their randomly selected stocks
outperformed the market.


In the book A Random Walk Down Wall
Street the authors noted that in the 1960’s
and 70’s one could reasonably expect to buy
ten large cap stocks and market 12% per
year per year.


With forty small cap stocks one could expect
to make 18% a year.


When you are buying and selling stocks look
at how the market prices things and avoid
bad stock investments.


Bad Stock Investments

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Bad Stock Investments