Stock Market Today

*  Watch what you watch and read.

Turn off the talking heads on TV and put down the latest investment periodical. These formats are informative if taken lightly and in the proper amount but they are more interested in selling subscriptions and driving ratings than they are about giving quality advice. The movements generated by the advice of those in the television and print media are not always the best for the investor. News only sells when it gets our attention and unfortunately that hardly ever equates to good news.

* Good (even great) well-established companies do not always make great stocks.

It seems counterintuitive that a well-established, well-known company would not automatically make a great stock to hold. Good, even great companies can and do falter as well as the lesser-known companies. In fact many of the well established companies get stale and have a hard time growing beyond the boundaries in which they have typically always existed. Too much exposure to too many of these giants can have a less than stellar effect upon your portfolio.

* This one could really be 2 in 1.

Do not put more than 10% of your money in your companies stock or within any 1 individual stock. The first part deals with most investors who utilize their 401(k) and have company stock within the plan. If the plan allows it and does not require you to hold a set minimum in stock make sure you have allocated your 401(k) holdings to limit your exposure to your company’s stock. In addition, within any portfolio (look at the holdings in the aggregate and not strictly by account) make sure that you have any individual stock position limited to no more than 10% of your holdings. We all think that the stock we have loaded up on is a high flyer and

because of their business model or sales or new product coming on the market it is bound to double in price. Every stock you purchase was from someone else who wanted out. Do not expose yourself to excessive risk with excessive positions. Remember some of the big stock blunders of recent years, Enron, WorldCom, K-Mart…the list is long and everyone had a reason to have 30, 50 even 70 or 80% of their holdings within stocks like these.

As I have stated on a very frequent basis, and will continue to do so at every opportunity, investing is risking and should be approached with care. One should never avoid investing but should approach it with diligence and understanding. The lack of knowledge of basics is one of the biggest hurdles I see most investors struggle with in regards to what they are looking for and what they expect. Balance out expectations with reality and see how well they fit. Get a good understanding of investing basics, especially including the emotional side to investing and utilize sound logic and reasoning. Chasing returns on the up side or running away from them on the down side never accomplishes either race. Utilizing logic and emotional balance as well as good asset class selection and you should find a much better fit. You and your portfolio will be much better served and more comfortable as a result.