Every amateur investor faces three problems : knowledge, time and money.
Let's face the fact that we are probably dealing with the smartest people in the world when comes to buying and selling stocks. These professionals know what they are doing because that is what they do for a living. Let's give them respect for that.
If they decided to sell stocks, there could be real good reasons of doing so. The company fundamentals could be really deteriorating, fully valued and etc. The moment we buy stocks from them, we are assuming the seller is wrong. We need enough knowledge and understanding to do that. An amateur should avoid stock picking if they are not ready, don't force the issue OK?
The good news is the know nothing investor can buy the whole market through ETF or index fund. ETF has sufficient diversification to protect the investor from lack of knowledge, or ignorance in a stronger word. Winners will weed out losers over time, Darwinism will take care by it self.
Those who want to do active portfolio investing must acquire sufficient knowledge or else they are at the mercy of randomness, hot tips, Fung Shui, etc. The long term results could yield 3-4% returns if they are lucky and suffering permanent capital loss is no surprise. There is no compromising here. Buffet, Lynch, Ben, Soros, Miller are all have formal training.
Will continue with part 2 this coming Sunday.
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