Recently, phrases like stock market investing for dummieshave been very popular. But personally, I think these are basically scams to get us to buy books. The idea being that some one can write a book about stock market investing specifically for us dumb investors who have no clue what to do. The bottom line is that these books are so basic that they teach us nothing about how to invest in the stock market and actually make money. The only people who make money are the book publishers themselves. And for what — selling lowsy stock market advice as how to guides.
I’m not saying that the whole Dummies series doesn’t have a place and that there aren’t any good bits of information at all. I suppose that if you read Stock Market For Dummies and Investing For Dummies that you will no doubt find a tip or two. What you won’t find though is a comprehensive guide that gives you step-by-step instructions for investing in the stock market today.
The people who publish the Dummies books are not the only ones. You can check about any of the “best-sellers” and find basic generic information on the stock market and finance and find the same lame self help guides. What you’ll have a tough time finding is specific real world application of strategies that you can use to invest.
There are exceptions of course. I’d strongly recommend How to Make Money in Stocks by William O’Neil as my top choice. If you need a beginners book, I’d suggest The Neatest Little Guide to Stock Market Investing (2010 edition as of this writing). I’d even suggest How a Second Grader Beats Wall Street: Golden Rules Any Investor Can Learn. At least in that book, they offer a specific and measurable strategy that in the end will probably help you make money in the market.
Read O’Neil’s book along with The Successful Investor.If you ask me what I would do personally if I was a beginning investor, I would take the following steps:
- Subscribe to the Investor’s Business Daily.
- Start focusing on determining the overall direction of the market. The market indexes I would focus on would be S&P 500, the Dow Jones Industrial Average, the NYSE Composite and the NASDAQ.
- Only invest when the market is in a confirmed up trend.
- Start watching the screens in the IBD every day.
- Develop your own watch list of stocks.
- Start reviewing charts on your watch list and figuring out the best entry points.
- Set up a stock simulator to practice your CASNLIM investment strategy.
- Learn to sell stocks quickly if they don’t go up and sell them when they have gains of 20 percent or more.
- Keep a journal of all of your trades so that you can review them.
- When you are right one in three times, start using real cash.
In the end, actual experience is the best teacher. Learn by doing and put the stock market investing for dummies books back on the shelf where you found them.