The Crystal Ball of Stock Picking Doesn’t Exist

If you were to ask me, as MANY people do, what stock to invest in, I could give you an answer.  However, it would NOT be the answer that you probably like. In order to give you a definitive answer for which one stock for you to invest your money in, I would have to have a crystal ball. Many people want that. I would be a billionaire – several times over – IF I could answer that question. 

But I can’t and here is why. 

First there are too many variables.  This is where it gets sticky and why some people get irritated that NOBODY can provide one answer.  I can give you explanations and answers, but it is not an answer to what one stock should you invest your money in right now. We will look at several examples to help explain why there is not ONE answer to the question but rather answers to questions about the stock market.    

Example #1:  A person contacts me about what stock he or she should invest in on a particular day. Let’s pretend I pick Apple, which I would never really say, but for example sake the answer is Apple, and this person decides to take my advice and invest on that date in Apple.  So this person, thinking this is the magic answer, invests all of his money in Apple stock ($AAPL) which is currently down 27.72% for the year.  Obviously our example investor is losing money, so he, not knowing the intricacies of the stock market or Apple as a company, sells at almost a 28% loss.  Since I told this investor to put his money in $AAPL stock, and he lost money, he is quite unhappy with me.  He doesn’t stop there, however, since all he wants is a quick answer and even quicker money.  So this person finds the next financial guru on the internet, asking the same question and probably getting the same result.  WHY?  Let’s go back to what I said earlier.  There are too many variables.  Instead of this person wanting to know what stock to invest in, he would have been better served to find out ABOUT the stock market and about his goals and disposition as an investor.  That’s where the answer lies.  

Example #2:  Similar scenario as example #1, but when this person contacts me about what stock he or she should invest in on a particular day, my answer is more vague. Instead of saying he or she should invest in Apple stock, I ask questions about his or her investment strategy, length of time in which he or she intends to invest, disposition of investing such as moderate or aggressive, and tolerance level.  Nope!  This is not what this person wants to hear either or see played out, so, again, this person moves on until he or she can find someone who is going to tell them to invest in such and such stock AND that stock makes money.  But in the real world, it does not really work like that.  So let’s look at one more example, to get a better answer and outcome.    

Example #3:  Again, similar scenario, but when this person contacts me about what stock he or she should invest in on a particular day, my answer again is vague, asking questions about investing and goals, BUT we are able to discuss building a portfolio and managing the portfolio along with his tolerance level and understanding of the market.  In addition, we dialogue about stocks he thinks would be good for his portfolio including diversification.  He asks questions, not about a particular stock that will make him an overnight millionaire, but about the marker and stocks in general.  He pushes me for an in-depth understanding of the market.  We have an exchange about multiple asset classes, multiple investment type products, personal risk type and profile, dollar cost averaging, and not trying to beat the market. This person understands the importance of time and contributions as being the key and “magic answer” to being successful in the stock market.  This person gets it and will be successful.  He is asking questions, discerning what he learns, and asking more questions – bigger questions that will yield profits.  

So… IF you ask anyone in what one stock you should invest your money in, you should get more questions rather than the name of one particular stock.  Ask the right questions, the bigger questions. 

Think about the following quotation: If you give a man a fish, you feed him for a day—if you teach him to fish, you feed him for many days.” While the origin of the quote is debated, the message is applicable to many different situations and industries, including the stock market and investments.  So, my answer to this question about what stock to invest in is more questions.  I am here to teach people about the stock market, so each person can be successful and that is my crystal ball.  Follow me, and read my blogs, and sign up for my emails for everything financial.  I am here to help you, to guide you, to coach you, and to educate you on your financial journey.  


Published by Budgetdog

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