On the Stock Market

The Wall Street Journal recently had a pretty decent article titled Ten Stock-Market Myths That Just Won't Die. If you're interested in throwing your hat into the stock market ring, it's worth a read.

(from Flickr user bfishadow)

I've dabbled in the stock market. I once thought Wall Street might be my calling, though it's probably good that I realized early-on that it's definitely not.

It's easy to write about how to invest wisely. It's extremely difficult to actually do it. No matter how smart you are, stock trading is really hard, not because it's overly complicated, but because it's a highly emotional activity, not much unlike casino gambling. Even people who fully understand how to invest well can make mistakes based on emotion.

Based on my research and personal experience, I honestly believe that there are only two investing strategies that will yield worthwhile results. The first is the simple long-term value investing that Warren Buffet has made famous. There are dozens if not hundreds of books on this strategy. The second is laid out in William O'Neil's book How to Make Money in Stocks - it's more complex strategy and requires diligent watch over the market. You probably wouldn't want to try it if you can't afford to spend at least an hour a day reading and thinking about the market. It also requires incredible emotional discipline, which is why it will never work for so many people.

After all, the WSJ missed the biggest stock market myth out there: that trading is easy. I can't imagine how much money has been lost as the result of people unwilling to accept that their strategies simply had no hope.