Hi. Enough with the greetings, I’m not here to make friends, I’m here to make you think! Everything you have been told about the Stock Market is bullshit and I’m here to prove it to you.
There are a lot of topics I want to cover and instead of just saying “Mutual Funds Suck”, “Diversification is stupid”, “Buy and Hold should be called Buy and Hope”, “Notice how every ‘lesson’ about the Market begins with ‘If you had…”, “A stock has to go up to make money”, etc I’m going to just pick a topic today and I’ll get to those others sooner than later.
Today’s topic is: You don’t own anything but a piece of paper with ink on it.
Yes, that’s right, you heard it here at InvestorGeeks first. You don’t own a company. You aren’t buying a piece of Microsoft or McDonalds or anything else. Try taking your shares of stock into McDonalds and getting a free Big Mac or calling Microsoft and telling them to ship Vista in March because you need it for a killer spring break LAN party you’re throwing. You have no say in a company at all if you own their stock, so quit thinking you do. We’ll set a rule right now, unless you own 5,000,000 (that’s 5 million) shares of a company, you own a piece of paper with ink on it.
What am I getting at? Well, trading stocks is a grown-ups form of trading baseball cards and nothing more. You go to the store, buy a piece of paper with pretty ink on it and hope that someone down the line wants it way more than you do and is willing to pay you money to take it from you.
You have your IPOs, which are just rookie cards, you have your seasoned vets like Walmart. It’s all the same. The goal for you is to buy up a bunch of Willie Mays and Mike Schmidt cards and avoid buying a handful of Sid Bream cards. The more popular your ‘player’ becomes, the more your stock is worth. It’s that simple.
It doesn’t even really matter what the stats are for your stock. As long as the fans love them, the value of your stock goes up. Weed out all of the ‘common’ stocks and don’t even look at them, they don’t matter.
Limit your exposure to ‘rookie’ stocks with a small percentage of your money because you never know if they’ll become the next A-Rod or end up injured and out like Bo Jackson. Take the majority of your money and throw it on the proven superstars that you know are headed to the Hall of Fame. Piazza, Jeter, McGwire = Walmart, Coca-Cola, McDonalds.
I think if you start thinking of stocks as baseball cards instead of companies, you’ll stop thinking of them as things you can’t replace and must hang onto and, hopefully, you’ll quit buying ‘common’ stocks in hopes that they have a break out year and stick with the superstars that get their teams to the post season year in and year out.