Keep Stock Market Investment Profits

Have you had one of those huge investment winners – a stock that went from $2.00 to $80.00? Or any other numbers you want that gave you a gigantic percent profit?

Did you take the profit or did you watch the equity drop back down to what you paid for it? I hope you sold and kept the money. That’s what it is all about. So many times when I was a broker I have seen customers make large profits and then think they were omniscient about trading and within a short period give back what they had made.

As a brokerage company owner I had seasoned brokers do the sane thing. One of my men made $150,000 in a short time. I called to congratulate his performance and suggested he take a vacation from trading for a while. He said, “No, Al, I know what I am doing”. The very next month he lost $155,000. What happened?

Listen carefully as I am going to tell you one of the great truisms not found in the trading training manuals. If you are doing any trading whether in stocks, mutual funds, real estate, currencies, whatever, this applies. Print this out, frame it and put it up on your office wall.

“Making a lot of money is just as upsetting to your mind as losing a lot of money”.

A big score destabilizes thinking. Many people want to do it again and again so they immediately plunge back into their investments with their winning cash and make bigger bets. It is almost without exception that they become losers and give back their winnings.

For many years I have advocated taking time off after a big profit. It takes time to get your head on straight again. As a former floor trader I would have about 6 or 8 times during the year when I made a good “hit”. Then I would immediately call my travel agent to ask where I could go for a week. I knew I must get away because my investment strategy would be clouded by success.

Too many of the big winners seem to alter their basic trading plan because they now had a large amount with which to trade causing them to deviate from their successful pattern. They then became losers. Because of their success their thinking changed and they were not aware of what had happened. The trader must get away and let his emotions down.

A disturbing event, even a positive one, can alter up your thinking. If you want to keep your investment profits you must keep your emotions under control.

Reasons to Invest in the Stock Market

The stock market is one of the most popular forms of investment for investors. If you don't invest yet, you might be wondering why someone would put money in the stock market. The truth is that there are a number of reasons to invest in the stock market. Let's look at a few of the best reasons that you might want to invest.

The number one reason that people invest in the stock market is for their retirement. If you start when you're young enough, the stock market is a fantastic tool to grow your retirement fund. The benefit that you have when you are young is time. This helps to average out the risk of the stock market because you have a long time to win. You can usually tolerate risk more when you are younger, because the stakes aren't quite so high. You probably don't mind investing in risky things at the beginning so you can build up your nest egg. Then over time, you can get into some more "cash cow" type of stocks and build steady growth. If you invest over a long period of time you can use the dollar-cost averaging method to steadily grow your portfolio. The basic idea behind this is that you periodically and systematically invest the same amount of money in a certain stock over time. This way you will be unaffected by the market and will have a large amount of stocks by the time you're done.

While it helps to start early, you don't have to. There are many scenarios that people have, that will keep them from investing until they get older. There is nothing wrong with that at all. It only takes one really good investment to make up a lot of years. You could have waited until you were 60 and then invested in Google and been completely fine.

Another reason that someone would want to invest in the stock market is for a career. You don't have to wait until you're retired to reap the benefits of your work. Many people, called "day traders" make a living out of buying and selling stocks every single day. They make multiple trades every day and make their living off of the daily fluctuations in the stock. They aren't in it for the long haul. Instead, they are there to make the quick dollar off of the market "ups and downs". This is another viable strategy and has been used successfully by many people. If you don't know what you're doing, you could stand to lose a lot of money doing this. If you don't do your homework, you'll most likely just be guessing on what a stock will do. In this scenario you might as well go to Vegas and roll the dice. Your odds of success are similar.

Besides these two obvious reasons, one of the most overlooked reasons to invest in the stock market is for the fun. There isn't much better than picking a big winner in the stock market. When you pick a really big winner and sell just before it goes down, others will look at you like you're a genius. You may have been guessing, but they'll never know the difference.