StockCentral’s own Doug Gerlach this year marked the 20th anniversary of participation in his first investment club. Achieving this milestone put him in a thoughtful mood, and he put together a valuable list of insights for other investors. Here we present the second 25 items on Gerlach’s list of “50 Things I’ve Learned about Investment Clubs, Investing and Life”:
26. Large-company stocks are dangerous because of the false sense of security they provide, keeping your capital captive at lower rates of return than can otherwise be achieved.
27. Markets go up.
28. Markets go down.
29. Markets are unpredictable. That’s the only predictable thing about them.
30. Investing regularly during a bear market takes courage but has a big payoff.
31. Selling winners to “protect” your gains is like cutting the blooms off your flowers and letting the weeds grow in your garden.
32. Your club shouldn’t be your only investment.
33. Buying a mutual fund in your investment club is a lot like putting ketchup on your blueberry pancakes — it doesn’t really work.
34. Greed is one enemy of prudent investing.
35. It’s not worth it to hold a stock if it doesn’t make up at least 3 percent of your total portfolio value (or you have a plan to add to your position to reach that level).
36. Chasing high-dividend yields is incompatible with a growth stock strategy.
37. Stock screening is the best way to find stocks to study.
38. You get better and smarter about investing in the stock market as you get older.
39. If you don’t want to do the minimal work involved in managing a portfolio of stocks, just buy a handful of well-chosen index funds or ETFs and be satisfied with earning average returns.
39 (a). Or subscribe to the Investor Advisory Service newsletter.
40. The strength and consistency of a company’s pre-tax profit margins are some of the single best indicators of the quality of a company’s management.
41. You have to be right only 80 percent of the time with BetterInvesting’s methodology to be successful.
42. Monitoring the performance of a stock’s fundamentals once you own it means more than looking up the price on some website.
43. Selling requires discipline, just like buying does.
44. You’re never as much of an expert as you think you are.
45. A stock split is a nonevent, no different from making change for a $20 bill with two $10s.
46. Giving people investment advice never works out. If you’re right, they take credit for being smart enough to listen to you; if you’re wrong, they blame you.
47. Historical fundamental stock data isn’t a matter of fact but is often largely a matter of opinion and interpretation.
48. Even though investment clubs are pass-through tax entities, it still benefits the members to be tax-smart in all investing decisions.
49. Trying to skimp on investment club accounting tools is a surefire way of paying for it later.
50. Never forget — fundamental analysis has the word “fun” in it for a reason!
BetterInvesting is a national nonprofit organization that has been empowering individual investors since 1951. Founded in Detroit, the association (formerly known as National Association of Investors Corporation) was born out of the conviction that anyone can become a successful long-term investor by following commonsense investing practices. BetterInvesting has helped more than 5 million people become better, more informed investors by providing webinars, in-person events, easy-to-use online tools for analyzing stocks and mutual funds, a monthly magazine and a community of volunteers and like-minded investors. For more information about BetterInvesting, visit its website at http://www.betterinvesting.org/investing/landing/openhouse/blog/index.html or call toll free (877) 275-6242.
About Doug Gerlach
Doug Gerlach is the founder of stockcentral.com and president of ICLUBcentral Inc., a subsidiary of BetterInvesting and makers of the popular Toolkit 6 stock analysis software. He is the author of six books on investing and is currently editor-in-chief of several investing newsletters including the Investor Advisory Service, a monthly stock newsletter founded in 1973, and the SmallCap Informer. Doug has been a member of investment clubs since 1993.