Invest Your Own Way

Everyone has heard the old versions of "long term investing always beats out the short term" and "value investing returns more than growth." Well I beg to differ. I was doing some of my taxes this afternoon (I actually liked it...maybe a career choice?)and I was putting in all the investments I had done over the past year. I started looking and noticed most of my investments had lasted an average of about 3 months. I had owned very few stocks for more than a year. Then I started comparing the returns. It is nice to be able to look back and see what you invested in after you have been able to view the market as a whole over that period. You get to see where your research was spot on and where you couldn't have been any farther away. My best returns were when I held a stock for a maximum of 3 months. The most fun I have is when I put money into a momentum stock and try to time the market. This is also the worst way to do things and isn't supposed to work at all if you read any books on the market. Experience also trumps book smarts so we are back at the starting line. The most thrilling moment was when I bought Merrill Lynch after Bank of America announced they were going to acquire MER. I kept it for 3 days and made $750. Not too shabby for a teenager having taken no finance courses at the time and had only the experience of watching CNBC everyday.

The better known investors like Warren Buffett and Peter Lynch would have bought value stocks and kept them for several years. At any rate, no one can tell you what type of stocks to buy and how long to hold onto them. If there was a set way of doing these things, everyone would be making money all the time. It just depends on you. Some people like to buy stocks and let them sit there for a while. Other people, not unlike myself, prefer to buy into a rally and sell after the stock reaches a certain point or the momentum seems to be unreal and is about to burst. You can make money regardless. The market is more like a game to me. I prefer to take riskier, yet educated, moves to make money. Of course I could lose a lot at any one point. Remember when you sucked at golf? Remember that one shot that brought you back every week? One stock could keep you coming back every week. Try playing the market the way you want to. Not necessarily how you are told to play it, but the way that would make you come back time after time. Put your kid's Christmas money in a stock and give it a try. If you win, do it again and take your kids to the beach. If you lose, that way obviously wasn't right for you and your kids probably deserved coal anyway.