How Not to Invest in the Stock MarketStocks
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So you want to start investing in the stock market. Good call; stocks are an incredible wealth-building tool and should be a part of everyone’s portfolio.
But as with all investments, there is a smart way to go about investing in stocks and there is a dumb way.
If you’d like to know the smart way to invest in stocks and get a $50 bonus to start investing today, check out our article How to Invest in the Stock Market.
But if you’d like to know the dumb way to invest in stocks, then read on.
You see, day in and day out for about two years, I had the opportunity to see the dumb way played out right in front of me in the form of an old roommate.
Let me tell you about him.
My Roommate, The
Stock Picker Gambler-Stockaholic
Shortly after college I shared a room with three other guys, and one of these guys was always telling me about his latest stock picks. He would spend hours after work “researching” his stock picks — checking charts, reading Stocktwits, checking Reddit, going back to Stocktwits, checking some more charts, and finally at around 2:00 AM placing his stop limit orders for the next day.
And during the day, when he and I were often both working our day jobs from home, I’d peek over my shoulder and all too often see him, sitting there, not doing the job that his company was paying him to do, but rather refreshing his screen to get the latest stock prices on his picks. This was beyond pointless, and I told him so when we would grab lunch at the sandwich shop around the corner.
Me: “What difference does it make if the stock price changed slightly from second to second if you already have a stop limit order on your picks?”
Him: “I need to stay on top of the market!”
Needless to say, he apparently wasn’t the greatest performer at work, or so I heard from another friend who worked in his department, and last I heard he’s still at the same level with his company. Don’t get me wrong — he was a bright guy with potential. But he just couldn’t stay focused. Why? Because of his obsession with picking stocks.
And guess what? He never made it big and in fact lost far more money than he ever made.
And here’s the saddest part: he didn’t care.
Sure, he said he did, and he was frustrated when he lost money. But at the end of the day, he didn’t really care about making money — at least not as much as he wanted the thrill of seeing his stocks go up and down.
He thought he was an investor, but in reality he was just a gambler, addicted to the adrenaline rush when the markets opened or when earnings were released for his latest stock buy. And instead of chips in a casino, or horses on a track, he placed bets on stocks on a screen.
A Better Way
My roommate would have been in a much better financial position today if he would have never picked a single stock. This would have freed up his time such that:
- He could have given 100% at his job, which in all likelihood would have led to promotions and salary increases that would have given him ample capital to invest in the stock market the right way.
Related: How I Grew My Salary by $100,000 in My 20s
- He could have found side hustles to do after work that would have guaranteed him additional cash in his pocket to invest.
Related: 100+ Ways to Make Extra Money
Rather than going down the path of my old roomy, I want you to know that there is a much better way to invest in the stock market.
And this way takes a few minutes a month at most to manage so you don’t have to stay glued to your computer screen, watching your stocks go up and down. In fact, you’d be better off not paying too much attention to the stock market at all! Compare that to the hours my friend would spend all day on his confounded stock picks.
You curious what this better way is? Read our article How to Invest in the Stock Market to learn.
Logan is a practicing CPA and founder of Choice Tax Relief and Money Done Right. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.