4-03 Buying Stocks that you Know

With so many stocks out there, what does the new investor buy? If you have plenty of time and wish to become an information and opinion junky, you could spend thousands of hours reading all of the newspapers, websites, financial blogs, discussion boards and newsletters out there that cover just about every single one of the 20,000+ stocks on the NYSE/AMEX, and NASDAQ. However, you’d need to dedicate so much of your time that your “headache quotient” would go off the charts.

Often, a “KISS” approach (keep it simple stupid!) is the best place to start. It can work for you better than many of the other so-called “experts” and sources of information out there. Ask yourself “what field am I an expert in?”

Are you a doctor and do you know what the hot new drug or pharmaceutical company is? Are you a school teacher and do you know what the latest gadget or software program is that your school is buying? Do you work at a grocery store and suddenly everyone is asking for XYZ product and you can’t keep in on the shelves? Are you a mother and suddenly all of the kids are asking for a certain brand of plastic shoes or a new iPod?

Mark's Tip
Each of us knows more than we think we know because everyday we contribute to the profits (or losses) of the stocks that we are choosing in the marketplace. We choose to go to Starbucks (SBUX) for coffee and skip our morning Diet Coke (KO). We eat lunch at McDonald’s (MCD) and not at Taco Bell (YUM). We buy our kids clothes at The Gap (GPS) instead of Limited (LTD). Why do we make these decisions? Because there is something about one product or the way one company is run that makes us want to go there versus its competitor. Do you ever walk into a store or restaurant and say “Wow! This place is packed all of the time?” If so, don’t walk out mad. Instead, find out more about that company and see if they are publicly traded. When my wife comes home from shopping, the first question I ask is “Where did you go?”, then “How much did you spend?”, and then “Was it crowded?” I am not just making idle conversation with my wife, I am researching stocks!