Monday, October 19, 2009

Stop the Madness!
Joe El Rady

I have been hearing from a lot of people about a great number of stock market strategies lately. People with no background in finance and accounting have been making a lot of money day trading on volatility or technicals or whatever. And yes, they have been making money. But guys, really, let’s be honest, any idiot can make money buying into a market that crashed 50%. Congratulations, you’ve made money by riding a market that is simply snapping back because it was pulled too far into the negative direction… like a tight string. You’ve made money surfing the wave of money returning from its panicked flight. Do not fool yourselves into thinking that these half-baked strategies are winners. Invest the time to become an investor, or else risk becoming another of the carcasses of “stock-pickers” that have littered Wall Street throughout history.

If you want to invest, get serious—and by get serious, I mean learn basic accounting so that you can read financial statements. You have to understand accounting! It’s the language of business. Unless you are willing to invest the effort to learn accounting—how to read and interpret financial statements—you really shouldn’t select stocks yourself. Selecting stocks without researching a company’s financials is, quite frankly, the same as letting it ride on red in a casino—fun, but ultimately not profitable.