I started investing in the stock market when I was young because my father invested in stocks.
Truthfully, he invested in several things, but outside of his own business stocks were the only investment he ever made any money on. He had a knack for purchasing shares of horses that were one sprint away from breaking a leg (this happened twice out of two times) and the two times he invested in real estate, he thought he knew what he was getting into, and didn’t.
So, while his investments overall were not more impressive than other people’s, he had credibility when it came to the stock market because he did make money there, and this is the advice he gave me.
Buy Shares in Companies That Have What People Need
This first piece of advice came when I was thumbing through the financial pages preparing to make my first buy. I had $410 and dad would match what I put in.
As I mentioned in my article “I Learned how to Invest in the Stock Market the Hard Way” I was pretty excited about investing in a particular magazine.
That’s when dad said it was best to own a share of something people needed. Since everyone I knew had a telephone I bought into a telephone company. It worked very well until I put my money into a mutual fund that had who-knows-what in it. Maybe even the magazine I wanted.
Buy Shares in Companies That Have What you Like
Shortly before my father passed away we went on a trip to Las Vegas with some friends and relatives. One evening my father and I went out to see the casinos (they are worth the trip all by themselves) and he began to tell me that whenever he traveled he stayed at a hotel owned by the Harrah’s Corporation.
He liked their hotels and bought stock in them.
He bought the stock because he trusted his own taste enough to know that where he put his money for leisure was a place to put his money for investing.
Essesntially, he would say that people should put their money where their money already was. Fast food junkies should put their money in chains they know about, because they are on the inside in some sense. Health nuts might consider soy, wheat, or oranges because that’s where their focus is.
A person who hates technology shouldn’t buy into Apple or IBM, and environmentalists should stay away from oil and coal. Not out of social consciousness, but because they’re more likely to lose money being outsiders.
When my dad stayed at a Harrah’s Casino he could get a feel for where the company was going by way of their service and amenities. This helped him see things from the inside.
All Investing is Really Just Gambling
And my father’s last piece of advice throughout the years was that investing is really just gambling. You could lose everything due to something that is out of your control – like when AOL and other companies used projected sales as real income in the late ’90s causing the stock to rise and rise. All the while, people were losing coin.
Whether one is short selling or long selling, the truth is, no one really knows what is going to happen.
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