Learning to Invest

LEARNING TO INVEST

When you are beginning your investing life it can be more than a little overwhelming. Everybody’s an expert when it comes to trading, and there must be a million websites you can try out to learn how to trade. With so much on the internet on how to invest it’s hard to determine what sound advice is and what is nothing more than somebody’s smooth sales pitch.

There are websites eager to teach you about the stock market, the futures market, the spot market, and the commodities market and every imaginable thing in between. One guy will guarantee success in a bear market, and another will tell you the road to paradise is paved with naked puts and calls. The currencies trader will tell you to leave the boredom of the stock market behind and the spot market is where it’s at.

I thought taking two seven hour securities license tests would make me an expert, and it fell short. So where does one pick up the necessary skill to make what they do every day investing and not plain gambling? For starters ignore all the guys on the net selling snake oil, it just doesn’t work unless you are in a bull market, and if you’re in a bull market an amateur can look like a seasoned professional. Think the stock market from somewhere around 1997 to 2000. Everybody was an expert then yet no one knew what they were doing in the end.

What about the guys who will give you fifty grand in fake cash and access to their trading software? Surely if you can double your money there you will at least make twenty percent using your own; right? Not. All those wonderfully educational sites fail to take into account two principles of investing in the stock market, and that is fear and greed. Those two powerful emotions control the market and will mess with your head like you wouldn’t believe.

When you are investing using fake money it is so easy to sit there and analyze everything and make decisions based on sound research and not fear of loss, or greed for more. You don’t believe me, just try one of those sites, and then invest with your own money and see it your returns are not drastically different. If you are in the business trading with someone else’s money and you have the fear of a bad phone call you will have to make should you lose your clients money, you will be surprised at your results. It is not easy telling people your advice lost them money, especially if that money hits six figures. I’ve been there, done that, and never want to do it again. If you are a stockbroker that is a road you will go down often, and it is never easy.

So, I have gone over the problem, so what is the solution? The solution for me and for many others like me was watching CNBC on TV. Starting the day with Mark, Joe and David in squawk box is the best single resource out there for learning about the market and is relevant for the new guy as well as the experienced long time investor.

When I began in the industry the company I worked for had a TV in every office that was tuned into CNBC and that is where I learned about the market. So what about those tests? You don’t learn how to trade, but you do learn a lot about how the market works. You learn the job of a specialist and a market maker. You learn why when my stock closed Thursday at 12 that it opened the next day at 7. You learn how to enter a limit order or a stop loss order and much much more.

So for anyone reading this, if you feel like you could stand to learn a little bit more then flip on the TV to CNBC and you will be a better investor for it.

Good luck and happy viewing.