Four Simple Stock Market Lessons Related to Life

Blain Reinkensmeyer

Posted on Mon 20th Aug, 2007 10:29:57 AM

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I actually wrote this article as part of a program for stock education way back in December of 2005. Funny that I found it now and it just reminds me that the stock market is similar to life in some simple ways. Every good stock trader utilizes these four lessons.

A Lesson in Trust

The stock market is a simple, fun place to be if you understand what it really is about. When you are going to buy a company’s stock, you are buying a piece of their company, literally. The reason a company has stock in the first place is so that it could raise money for company growth. This is a very simple yet important understanding, because when you hear, “Buy and sell higher”, what you are doing is buying a piece of company A, and later in time selling that piece of company A at a higher value, because it is now worth more. Now, think about these no brain questions: would you leave your child with a babysitter you don’t know? What if that babysitter came highly recommended to you by a friend; would you leave your child without meeting them at least first? If the answer is yes for either, you might as well go call those numbers listed above, because those guys can suggest “great babysitters” for you every day of the week, even on weekends! Just like with finding a babysitter, finding a stock goes the same way; you are leaving your money with a money babysitter; shouldn’t you interview them first?

First lesson about the stock market- When you buy stock, you are buying a piece of a company. You don’t leave your child with a babysitter you don’t know, so don’t leave your money in a company you don’t know anything about.

A Lesson in Appearance

I was mowing a lawn one day when I saw a young and very attractive female tanning in a backyard. Thinking I struck gold, I spent the next five minutes mowing the same patch of grass over and over again so I could glance randomly at this girl. Well, the next day I came into school with a great story to tell the guys at lunch, and boy was I in for a surprise. After telling the story, one of my friends asks me, “did she live on xx street?”, “yes”, I responded. “Is she a senior this year?”, “Yea I believe so actually (I had seen her in the halls before).” “Dude, that is Lauren so and so, you do not want to even look at her again.” I asked why to find out that she was very well known amongst the older guys, and not in the way you want to be known by older guys, or any guys for that matter. In the stock market, you will see some just BEAUTIFUL companies (stocks) at a first glimpse, and just jump right in without taking a closer look or finding out more. Well, your emotions will very well be the death of your money if you act in this manner time after time. I don’t care how many toppings you put on that ice cream, if it was made with rancid milk, I don’t even want to touch it!! It is up to you to do your own due diligence, create a checklist, and make sure all the ingredients are in tact before taking a bite. If you don’t research your babysitter, she is going to take your baby (money nest egg) before you know it.

Second lesson about the stock market – Though a company may look like a diamond in the rough, always make sure to check out the important aspects that make it up before “jumping right in” and buying it. Don’t eat ice cream made from rancid milk.

A bottomless jar of cookies

Everyone has heard the rhyme that starts with, “who stole the cookie from the cookie jar…” Well, that simple rhyme really applies to the stock market as the market works quite the same way, except there are A LOT of cookies and a lot of cookie jars! Did you know that there are over 7,000 publicly traded companies on the US exchange alone? One of the biggest companies has over 10 BILLION shares; I don’t know about you but that is a lot of cookies. Every company has a different jar of cookies, and just because one is out of good cookies, doesn’t mean you can’t go to the next jar. The last lesson told us to make sure we know what we are buying before we actually buy, so what if we know the jar contains all good cookies? Well, I steal one, then you steal one, then your neighbor steals one, and soon enough all the good cookies will be gone; this is the time to find a new cookie jar! The stock market has a lot of great buys, and just because you feel you “missed the train”, doesn’t mean you can’t get on the next one coming. Don’t buy something that you feel doesn’t have any more good cookies; just find another jar.

Third lesson about the stock market - The market is a huge place filled with tons of great opportunities; just because one great opportunity is gone doesn’t mean there aren’t any left. There are over 7,000 cookie jars, so if one jar of cookies goes stale, don‘t eat from it; find another jar!!

Free cookies everywhere

News is a big influencer on stocks and the stock market. Some news will drive stocks to over inflated levels at ridiculous rates. Everyone may remember the time when Sirius Satellite Radio was running wild in the news. The company just got a new CEO, Howard Stern signed on for a $250 million dollar contract, amongst other things. The stock ran from a measly $2.20 per share to over $9 a share in less than a month. If you were one of the last people to steal a cookie from the cookie jar and get into the stock, well you were in for a surprise, because the stock fell all the way back down to a low of $4.36 per share not even a few months later! News can drive the public crazy for one cookie jar, and in the stock market you have to be careful. The news when it comes to the stock market is basically a few people speaking out for a ton of people, telling you to do things without thinking about them. When it comes to your nest egg, you should be making the final call, not someone else! Don’t let people or the media tell you what is a good buy and what is not. A true helper is one that gives you his or own opinion backed up by facts, and then let’s you decide the final call. Just because there are free cookies everywhere, doesn’t mean they are all good to eat!

Fourth lesson about the stock market – Media and the market can equate to a very negative and persuasive combination. Help will come from many different places and people, but just because they exclaim, “free cookies!” doesn’t mean you should go ahead and eat them. Careful always is the creator, for he manifests his own destiny.

The Market in a summary

Remember the following four lessons about the stock market:

- When you buy stock, you are buying a piece of a company, literally. You don’t leave your child with a babysitter you don’t know, so don’t leave your money in a company you don’t know anything about.
- Though a company may look like a diamond in the rough, always make sure to check out the important aspects that make it up before “jumping right in” and buying it. Don’t eat ice cream made from rancid milk.
- The market is a huge place filled with tons of great opportunities; just because one great opportunity is gone doesn’t mean there aren’t any left. There are over 7,000 cookie jars, so if one jar of cookies goes stale, don‘t eat from it; find another jar!!
- Media and the market can equate to a very negative and persuasive combination. Help will come from many different places and people, but just because they exclaim, “free cookies!” doesn’t mean you should go ahead and eat them. Careful always is the creator, for he manifests his own destiny.