I was inspired to jump into the stock market after reading The Neatest Little Guide to Stock Market Investing by Jason Kelly. While most kids are still jumpin' on the day trading bandwagon, Jason opts for the "work smarter not harder" philosophy and suggests that by taking the time to find fundamentally sound companies we don't need to get caught up in the day to day ups and downs of the stock market. Walmart or Starbucks isn't going to crash overnight or even in a couple weeks. This style of market research is called fundamental analysis.
Jason makes very little assumptions about the reader, and since I don't have an MBA I love this. Words like market capitalization, EPS, P/S, revenue, and so on are all followed by definitions and the mathematical formulas for playing along at home. Jason is also a great story teller, and takes a complex beast like the stock market and puts a leash on it long enough to point out some defining characteristics. [Insert corny bull or bear pun here]
After reading this book I felt like I was ready to dive into the stock market and start researching companies. When it came to making trades I had to grab Jason's book to help with the scary last minute confusing terms like GTC, Bid vs Ask, and limits. I felt supported in those last moments of diving in.
Now that I'm in the trades though, I feel there's one area of the book I was wishing there was more content on. If my stocks fall how long do they fall before I take my losses? And, at which point do I cash in my profit chips and buy my wife that mint green vespa she's always wanted?
While those questions may not have been answered as thoroughly as I had hoped for there were two very fundamental concepts I learned from Jason's book. First, if you're trading for money you are not going to make money. if you find yourself saying "I'll sell after I double my money" you are are doomed to failure because your greed is blurring reality. Second I learned that stock market eats newbies such as myself for breakfast. On the side of every trade is not another company, but a person who is betting the exact opposite outcome you are. And what's between the two decision points is a pool of emotions waiting to absorb the newbies. I find that fascinating, and am ready to be kicked around a bit by stock FUD.
Look for me over in the Investopedia community. Meanwhile I'm looking for a cool way to automate my trades so they show up on my blog. I think I've *almost* got it with Yahoo! pipes.
Anyone know of any other community stock pick sites worth checkin' out?
