Stock Market Advice

Written by Jacey Harmon
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Stock market advice can be given by darn near everybody. Unfortunately, like everything else, there is good and bad stock market advice. Finding good advice is a bit challenging because most people involved with the market are product salesmen. In this group I often consider stock brokers and insurance salesmen as the main culprits. Though these individuals are in the investment profession they do not always understand, or care to understand, the market. Instead their main objective is to sell a product or service to you to earn a commission and make a living. This can often consume a broker's time and does not allow them the time to learn the markets and provide sound market advice.

Examples of Some Bad Stock Market Advice

The worst advice a person can get is to hold on to a losing investment. The great bull market between 1982 and 2000 caused many investors to develop somewhat flawed investment philosophies. One of these is the theory that all stocks eventually move higher over time and this simply is not the case. Out of the 10,000 different stocks listed on the various US exchanges only a small percentage will be long term winners.

The reasons to not hold a losing investment are rather simple. You protect your capital and provide for an opportunity to find a good investment. When you hold a losing investment you do not know if the stock will rebound or if it will turn into an Enron. A stock that does eventually rebound may take years to finally get back to the point where you originally bought it. This will cost you one of the most valuable commodities in the investing world--time.

Another bad investment philosophy or piece of advice is that "market timing" is a myth. This simply is not the case. Most advisors do not understand what the term "market timing" means and how to apply it. When I talk about market timing I am not talking about timing the market on a daily basis. Instead, I mean having the ability to recognize changes in the market environment that signal a shift in the market's trend. This is possible if you study and understand the daily price and volume movements of the major averages like the NASDAQ and S&P 500. If a person tries to sell you on the belief that market timing is not possible do not listen because he or she does not understand how the market works. Instead take the time to find that special individual who can help you manage your investments correctly.

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