3 Investing Tips You Need Right Now

Investing in stocks is simple, but far from easy.

Conceptually, most people intuitively understand investing -- you exchange your money today for a piece of a company that will hopefully earn you more money over the years to come. And thanks to discount brokers like E*Trade (Nasdaq: ETFC  ) and Charles Schwab (Nasdaq: SCHW  ) , the execution is easier than it's ever been.

But actually doing it "right" and being successful over the long term, well, that can be another story completely. Some folks -- such as Vanguard's John Bogle -- think that most investors are better off skipping individual stocks altogether and opting for a low-cost index fund. Meanwhile, we get quips from Berkshire Hathaway's (NYSE: BRK-B  ) Warren Buffett like "be fearful when others are greedy and be greedy when others are fearful" and opposing thoughts like "the trend is your friend" from trader-types. Enter the head-scratching.

Having a solid grounding is always a must for anyone who wants to be a successful investor, but with today's markets crazier than a shouting match between John Malkovich and Gary Busey, it's more important than ever. So whether you're a newbie to investing or a seasoned vet, here are three tips to help you make sure you're investing Foolishly and not just foolishly.

1. Know thyself, Fool!
There are few easier ways to land yourself in an investing pickle than to not have a good idea of where you stand when it comes to putting money into the market. This is particularly important because there isn't one right way to succeed -- Buffett, George Soros, and James Simons have all been tremendously successful, but each has had a very different approach.

How do you approach the market? Are you more of a speculator who's looking to capture the movements -- often short term -- of a stock's price? Or are you more of an investor, looking at the nuts and bolts of the underlying business and hoping to profit from its prosperity?

Forget the connotations of the words "investor" and "speculator" for a moment and honestly figure out how you approach your picks. Plunking down money for shares of Intuitive Surgical (Nasdaq: ISRG  ) because of the long-term prospects for its da Vinci surgical system may be a solid investment, but you don't want to shoot yourself in the foot by looking at that investment with the eyes of a speculator and selling just because the stock price has moved against you.

2. If everyone else jumped off a cliff ...
I think most of us are familiar with this fantastic bit of motherly logic. The idea is that just because everyone else is doing something that appears to be misguided, doesn't mean that we have to follow along. This is particularly true of investing where the focus on short-term results often causes investors to act like a herd of crazed lemmings.

One of the best examples of this that I can think of is the heat that Buffett took back in the late '90s for not jumping on the tech bandwagon. While most investors out there -- institutional and retail alike -- were raking in gains by betting on stocks like Cisco (Nasdaq: CSCO  ) and JDS Uniphase (Nasdaq: JDSU  ) , Buffett hung onto "boring" long-term holdings like Coca-Cola (NYSE: KO  ) and listened to investing rookies say that his style was a relic. At this point I think we all know how it worked out for the folks that went crazy over Internet stocks.

Keeping a sober, independent view when it comes to the stock market can be one of the hardest things to do, but it can often help you avoid the cliff that the rest of the lemmings are preparing to march off of.

3. Tips are for waiters
When I started writing for The Motley Fool, I figured I would forever be running into people who would want stock tips from me. In fact, it's been quite the opposite -- most of the folks who want to talk stocks have tips for me!

Of course it's after hearing many of these tips -- which often amount to something like "my uncle thinks AIG is poised to break out!" -- that I realized the wisdom of Jesse Livermore's supposed admonition that tips are for waiters.

Watching Jim Cramer scream out a boatload of tickers or jawing about stocks with friends can be fun, but when it comes to actually plunking down hard-earned money to buy stock, be sure to have your own thinking behind the purchase. A good way to do this is to write down the reasons for your investment. This doesn't have to be a doctoral dissertation, but it ensures that you're going on more than "Bob at the gym said it was a sure thing."

Putting it to practice
Every investment you make -- or decide not to make -- is more practice under your belt. Just like anything else, the more practice you get, the better you get -- provided, of course, that it's good practice.

Making sure that these three items are baked into your decision-making can help you get the most out of your investments and become a better investor. To recap, what we're looking for is:

  1. Know what kind of an investor you are and make sure your investments are consistent with that.
  2. Think independently and avoid becoming a market lemming.
  3. A stock tip can sometimes point you in the right direction, but always make sure to do your own research and have a good reason for buying a stock.

You can certainly take off now and put these ideas to work on your own, but sometimes bringing the right coach into the equation can help you progress even faster. The advisors at the Motley Fool Hidden Gems newsletter are all seasoned investors that I see putting these ideas to practice all the time.

With a subscription to Hidden Gems you not only get stock recommendations from these stock market vets, but you get their thought process and philosophy on investing. And you can check out exactly what I'm talking about by taking a free 30-day trial of the newsletter.

Fool contributor Matt Koppenheffer owns shares of Berkshire Hathaway. Intuitive Surgical is a Motley Fool Rule Breakers selection. Berkshire Hathaway and Charles Schwab are Motley Fool Stock Advisor recommendations. Berkshire Hathaway and Coca-Cola are Motley Fool Inside Value picks. Coca-Cola is a Motley Fool Income Investor selection. The Fool owns shares of Berkshire Hathaway. The Fool's disclosure policy loved that computer game about lemmings; whatever happened to that?


Read/Post Comments (29) | Recommend This Article (79)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 29, 2009, at 3:15 PM, jbrt wrote:

    once again , nothing but CONTRADICTIONS

  • Report this Comment On April 29, 2009, at 5:11 PM, celumley wrote:

    i follow your 4 and 5 star selections closely and am doing fairly well thanks to you

  • Report this Comment On April 29, 2009, at 7:54 PM, jozie28 wrote:

    Bob at the gym told me that those "hidden gems" are for waiters.

  • Report this Comment On April 29, 2009, at 10:04 PM, skully201 wrote:

    Who mama. Such fine tips on stocks? I muni. Such a fine road to travel. For now this party is over. It will be well again when loads of the recent buyers need their money out "right away" to meet their obligations. Then the long term muni buyers will come back to the market when liquidity is somewhere but not where sellers want it to be. I like long; very long.

  • Report this Comment On April 29, 2009, at 10:12 PM, tomd728 wrote:

    John Bogle my eye !!!!

    Money put to work in Index Funds have had a miserable return to wit:Since 1965

    the Dow has averaged an annual return of 8 % the S&P 9 %.Even with a compounded basis the return is minimal compared to a Buffet styled individual stock return.

    The DCA approach when applied over time does not

    work either with Index Funds as we all know the cost of sideways and terrible down markets.

    What I rarely hear is the term "trailing stops" when an investor has what he believes is an appropriate profit.

    In a universe of 8,000 stocks, new ETFs daily,etc.etc.why look back if your dd puts you into

    the appropriate stock on the next trade.

    No one has ever lost real money over time using this

    approach.But ask some fellow or lady what they think

    about Index Funds when their 401K has now been ravaged.Had they had their money in a Money Vehicle......what did that return ? Sure, it was safe.

    The sad fact is that too many people believe the Mutual Fund myth and pay no attention to the matters

    at hand which is monitoring what you are holding in fair weather or foul.

    Me ? I bailed out of all stocks a bit late and ran for cover of GNMAs and 30 Day Money.Did I catch the

    "March Madness" or "April Fool" ? No.In fact I got beat up shorting the S & P and Financials but my hide in tact,my finances whole (diminished but that's the Market) I am back to buying on the fundamentals that I use and better late than never.

    Mr.jozie28.......I'm glad to see Bob from the Hedge Fund is not in Federal Lockup but at your gym.

    Watch your wallet !!!!!!!!!

    Respectfully,

    Tom

  • Report this Comment On April 30, 2009, at 12:44 AM, Sembo1 wrote:

    I am a member of M F Stock Advisor; so, I received this blog offering 3 Cloud Cos. After reading 5 pages. you won't tell me the name of #1 unless I must pay to join another newsletter. This makes me mad to have been required to go through so much and then not getting the info. Stop teasing me and then stiff me in the end. Herb

  • Report this Comment On April 30, 2009, at 1:11 AM, Guillaume7 wrote:

    I agree with Sembo1 or Herb. You keep on teasing with sensational news and end up leading us to the cashier. What's the sense of paying the subscription to get nothing unless you pay more and more? Guillaume

  • Report this Comment On April 30, 2009, at 1:11 AM, paultaut wrote:

    Come hell or high water, I'm looking for a 10% move above 9,000 for the Dow over the next couple of weeks.

    Just like the Bulls fought the slide from Oct. 2007, the Bears are fighting the Mar.2009 nascent bull.

    The Bulls will be Hammered one more time and the Bears will prowl the hallways again fairly soon afterwards BUT, there will not be a new Low.

    The Johnny come latelies will have to be very vigilant with insurance on their long positions but with all of the Double/triple shorts avaiable it will not be an expensive proposition.

    Let the food fight begin.

  • Report this Comment On April 30, 2009, at 7:01 AM, inverbrass wrote:

    I agree with Sembo 1 and Guillaume. A great deal of prose with very little information. Why not just buy "Shamwow". You can order now and get a second one free.

  • Report this Comment On April 30, 2009, at 7:36 AM, ejhejh wrote:

    I agree with the comments about the constant teasers from the Fools. I bought my subscription only to find that your information is spread between a seemingly endless number of related publications that promise more and more great insights that I just can't live without. But I'm guessing that when I start adding on subscriptions, I'll just get more teasers. How about putting it all into one publication with one subscription rate. That way I can find out how to retire, how to buy caps, how to stay ahead of the tech curve, etc. Without getting hit up for more and more and more.

  • Report this Comment On April 30, 2009, at 7:42 AM, Hebmeister wrote:

    The only major investing mistake I made in the last year was subscribing to Fools, since all I get is teasers and invitation to spend more money. I certainly learned my lesson...

  • Report this Comment On April 30, 2009, at 8:14 AM, gypsyrosetrader wrote:

    I also, invested in one of the "fools" newsletters "rule your retirement"...now my motto is...."only a fool would invest with the fools"

  • Report this Comment On April 30, 2009, at 3:31 PM, randytrain wrote:

    I also feel "foolish." I recently spent the 79.00 for the important info promised by the Motley bunch, only to read and read and read and finally find out they want me to subscribe to yet another newsletter, etc., to find out what I need to know. I noticed when I subscribed it said "I will automatically be resubscribed" at the end of one year. NO I WON'T...

  • Report this Comment On April 30, 2009, at 4:30 PM, TMFKopp wrote:

    I certainly appreciate so many people taking the time to provide feedback, but frankly I'm a little confused by the responses.

    What exactly is it about this article that is a "teaser?" Yes, there is a suggestion at the end that you may want to check out Hidden Gems, but whether or not you actually do try HG doesn't impact at all your ability to use the rest of the information that's presented in the article.

    If you've gotten this far and you're thinking of it as some sort of teaser, I'd encourage you to go back and read again. There are three tips that have helped me become a better investor, and you can take those tips and put them to work whether or not you even read the two small paragraphs about Hidden Gems.

    Matt

  • Report this Comment On April 30, 2009, at 4:31 PM, wolfus wrote:

    I've had enough of your 5 page teasers that ask for more money on the last page. This is advanaced notice that I do not want my subscription renewed.

  • Report this Comment On April 30, 2009, at 4:42 PM, dbjella wrote:

    TMFKopp -

    I think these people are pulling your leg. Your article is fine and has good insight.

    I think the teaser posters are referring to the links inside the article that describe the Hidden Gems service.

  • Report this Comment On April 30, 2009, at 9:43 PM, mdg40 wrote:

    I get a chuckle out of reading the comments on some of these articles, they want to be told what to do, without doing their homework, then get mad when it doesn't pan out for them! These are just suggestions people! Nobody can tell you how the market is going to move, they are just giving you more insight into these companies. I personally have done very well with the information the Fool provides, but I take it as 1 view along with others before I make my decision. I have my reasons for making my investments and have no one to blame if it doesn't work! I think this article like most of the articles is very well written!

  • Report this Comment On April 30, 2009, at 9:48 PM, nofoolingforme wrote:

    I subscribed to three of your newletters including the expensive Million Dollar Portfolio. (You need to change the name of that as it is now worth only a few hundred thousand). Your advise has been run-of-the mill at best and i lost alot of money by following it. I have done well on the other investments that I made based on my own research and common sense. You keep on bragging about those few investments that have done well but we rarely hear about the ones that haven't. For example, on your advice that it was not as exposed to bad loans as the other banks and was worth $40, I bought Allied Irish Banks at $20, then $16, then $5. I haven't heard anything about it from you guys lately. Could that be because it flopped and is now worth around $2. One by one I am getting out of your newsletters. You should give all of us some free subscriptions because you have steered us so wrong, but I'm sure you don't have the integrity to do so. You got several hundred dollars of mine but I won't be fooling around with you again. Thanks for the miseries.

  • Report this Comment On April 30, 2009, at 9:52 PM, jdeslaur wrote:

    I view these freebies like the snacks at costco, you get a taste but if you want a meal you gotta pay! Yet there are enough tastes to make a meal you just gotta work at it.

  • Report this Comment On May 01, 2009, at 1:43 AM, samsonrodriguez wrote:

    People The Motley Fool do their job, you know the thing that pays you at the end? Are you expecting your job to pay you, regardless of your obvious slacker attitude? You are not gonna get the cow in lieu of the milk Jim-Bob! What next tell me I need to get paid less, in order to pay off the neighbors mortgage? How many burgers and sodas do eat free? and how many times have you scolded philip morris because your last drag sucked? hey sucked, i made a funny!

  • Report this Comment On May 01, 2009, at 1:16 PM, stevee9998 wrote:

    I agree with many of the other opinions. Too darn much marketing and trying to get me to spend more money. I have paid for information not marketing. I MAY be nterested in other info you have for sale but WILL NOT buy if it seems like all you do is look at me as a prospect. Deliver the GOODS first then market additonal info please.

  • Report this Comment On May 01, 2009, at 3:07 PM, 4xsive1 wrote:

    I have great respect for the CRUE, but I do agree that the facts you have to offer are good. The money for more info should stop. I think the "read this" then at the end pay$$$$. Best of luck with the letters that cost more money.

  • Report this Comment On May 02, 2009, at 6:08 PM, culcha wrote:

    The article is OK. Some very basic investing advice -- and a commercial message at the end. I myself just ignore the commercial messages, although some people here seem to be highly bothered by them. Maybe there is the expectation on the part of some of these people that there will be "stock tips" rather than investing tips. (The word "tips" misleadingly encourages this. If tips are really for waiters, then perhaps the word has no business being in the title.)

  • Report this Comment On May 02, 2009, at 6:43 PM, wuff3t wrote:

    Words almost fail me. Seems like a lot of people are expecting to receive free stock-picking advice. How do they think TMF would survive if they didn't charge for their advice?

    nofoolingforme - you haven't lost anything on AIB yet, unless you've sold for a huge loss. TMF work on holding for at least 3 years, usually longer, so you can really only rate their success or failure after that length of time. I know it's tough to watch a stock fall that far (I own AIB as well) but you need to bear this long-term timeline in mind whenever you use a TMF recommendation as a basis for a purchase.

  • Report this Comment On May 04, 2009, at 12:55 PM, mattksek wrote:

    Yes, I will be another whiner complaining about the marketing. No, I don't think I should get advice or "tips" for free but boy am I ever getting sick of being directed to endless marketing pages and constant sales pitches!! I am new to personal investing and am getting quickly fed up with paying for basic common sense info and constantly being marketed to. Please stop trying to sell me stuff!!!!

  • Report this Comment On May 05, 2009, at 7:22 AM, Jasbir101 wrote:

    I subscribe to fools advisory, but all I get is miles long advertisements pretending to give tips through free reports. It is a colossal waste of time. Then one has to separately subscribe for stocks, income, retirement etc. It is sickening.

  • Report this Comment On May 06, 2009, at 9:56 PM, Ozcutty wrote:

    There cerntainly is some bad and contradictory advice on the fool these days. Like buy AB at 70 and sell at 17. Buy LM last year, since then its reported 5 qtrs of heavy losses. MKL was overpriced, AXP was overpriced, AIB??? Ireland is in a terrible mess

  • Report this Comment On May 08, 2009, at 1:28 PM, dollargone wrote:

    I happen to be also in the majority here, with sentiments echoing the likes of Jasbir101, and many others.

    This is a marketing ploy-at best. As the old saying goes- you get nothing for nothing, well here too I have time and again got nothing for $omething.

    If at some point I had not stopped to re-evaluate and very carefully my subscriptions, not withstanding some "foolish advice" I would have either gone completely broke by listening to MF advice for investments/stock picks, or the fool that I am- I would have continued to throw good money after bad.

    Buy one get the one you buy! Nothing here we dont know about....." A fool soon parts with his money"....

    Oh how true those words are!

    Have cancelled all my subscriptions-and whats more, your calendars seem only to last 8 months, not 12...bought subscription in May 2008, and billed for renewal in January 2009 for same....for shame...

  • Report this Comment On May 08, 2009, at 10:04 PM, concan2 wrote:

    Whine, whine whine!

    Geeminy you guys- You don't HAVE to read all 5 pages - you can skim - easily. You don't HAVE to sign up at the end of the article (and EVERY article has loads of information and therefore increases your financial education by the way.) and you don't HAVE to invest at all. NO ONE was twistin your little arm, and No investment is bulletproof and you oughtta know that by now....

    If you do take the time to study TMF newsletters, follow the links and ads (quickly bypassing some of the ads , stopping at others) you will discover a pattern (or rhythm if you will) and some outstanding overlaps and consitencies in the mixes that have helped my portfolio immensely, as well as my knowledge and confidence.

    You're not taking the time to learn and be thorough - you're all whining because you want it NOW.

    As for the advertising and baiting and 'teasing' - you can skip on over it and get to the meat if you want to and it's a brilliant design on behalf of TMF

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