During the covid crisis, I’ve had a lot of friends asking me about my thoughts on stocks.

I figure I will post some of the things I’ve been saying in the thread below.

First, I am not a professional financial advisor. Whatever I say is through the prism of my own life experiences and temperament. And each person has differing experiences & risk tolerances & beliefs. So there is no one size fits all approach.

But here goes: If you’re interested in buying stocks you need to know the following.

“Wall Street” ( trading stocks) is the most sophisticated game in the world. Far more complex than the World Series of Poker that you see on tv.

So unless you want to major in finance and move to NYC and get a job with Goldman Sachs or Morgan Stanley, I wouldn’t recommend downloading Robin Hood app and thinking you will successfully trade stocks for any significant amount of $ and have success with it.

I also would NOT take stock tips from the man on the street. If you have a co-worker saying “company X is the hot thing to buy,” let that go on one ear and out the other. This is the most sure sign of bubble in whatever asset they are talking about.

Quick story: I was in college during the Dot Com bubble. Companies that no longer exist were selling like they were the best companies in the world. People quit their jobs and became “day traders.” By 9-11, most had lost it all.

I worked throughout high school and first year of college. And had money to “invest.”

Some people around town that owned a great business told me “Sun Microsystems is the stock to buy.” I had never heard of it, but these people were smart so I did it.

I bought $500 @ $25 a share. Within a few days it was at $30. And I was like wow this is easy.

I sold the shares and had my first profit. It went back to $25 a few days later and I bought it again. This time it went to $20. So I said well it’s time to buy more. Buy more @ $20.

But then it went to $15. So I bought more. Then $10. And I bought more. Then $7. And I was out of cash.

I didn’t sell, thinking well it’s going to eventually come back. After 9-11 it went to $2.

When I graduated college few years later it was back to $7.

The $3000 I had put in it in 99-00 was now worth $1500.

I sold it all took the cash and began my career. And didn’t buy another stock into 2007.

If you have read this part of the story and are thinking man I’m not buying stocks, this is gambling, well you’re partially right. What I was doing WAS gambling. I thought it was investing but it wasn’t. It was gambling.

But during my time at UGA I met people who understood actual investing. Not speculating. Not gambling. But actual investing.

I began to read books by successful investors. Again not gamblers or speculators.

If you want to understand the difference, here it is without the nuance:

Gambling is buying today & hoping it goes up selling hours or days later.

Speculating is doing this, but reading a few charts or looking at recent trends and then trading quickly.

Investing is a whole different ballgame.

Investing is learning all you can about something and then saying I think this makes sense for the long term, at this current price. I’m buying.

This is what we do when we buy a home. Or when we invest in our education via college.

So, if you’re still following this thread, and wondering ok how do I buy stocks then and do it as an investment instead of gambling or speculating?

Responses coming in next few tweets.

The first thing every person should be doing is investing in an IRA and/or 401k.

401k is usually through a person’s employer. IRA is something you set up yourself in addition to the 401k.