Why You Shouldn’t Try to “Get Rich Quick” in the Stock Market

September 29, 2021
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For the rest of our lives, we’ll be comparing “pre-pandemic times” and “post-pandemic times.” We’ll reflect on how we spent our days in quarantine; the hobbies we picked up and quickly abandoned, and the activities we carried into 2021 and beyond. With no sports on TV, no restaurants or bars to visit, the internet at our fingertips and in many cases a little extra money in our pockets, many young Americans ventured into the world of trading individual stocks.

 

To be a successful day trader, you have to be right day after day. If you’re constantly trying to capitalize on hot new stocks every week, you must invest significant time into personal research and consistently make correct decisions about what to buy and sell. Also, you must outperform professional day traders with access to superior technology and research material than yours. Conversely, at Golden Pond we prefer to buy companies with strong balance sheets and positive long term growth outlooks, who sell goods and services that will be in high demand for many years to come. We do thorough research at the outset, pick quality brand name companies, and let time & compound interest do its thing. Every quarter, we review our individual stocks and decide if it’s time to let any go, again after doing extensive research on the company’s long-term outlook.

 

If you are spending significant time making short-term changes in your portfolio, you are probably more likely to make a bad decision when market takes a downturn. Paying attention to your money is a good thing but getting too wrapped up in daily performance can lead new investors to panic and sell at the bottom of a market correction. We help clients determine how much income they need from their portfolio in the next eight years and allocate that to more conservative investments (not stocks!) so they don’t need or want to lock in losses when the market inevitably drops.