Always remember: Smart people make money when times are good. Rich people make money when times are bad.
It’s pretty much all people have been talking about; Bear Stearns, the fifth largest investment bank in the U.S., whose stock was up at $160 last year, got blown out in a firesale deal to JP Morgan for $2 a share.
Playing the Patience Game
A lot of people that get into trading stocks jump in, buy a bunch of stocks, and then sit and watch the ticker hoping for the best. Or, they get into the game because they’re girlfriends’ second cousin’s husband is a trader and gave them a (not so) hot tip.
The smart way to play is to follow some basic “market truths” and exercise the patience you need to jump on the smart opportunities. Here’s a quick list of what to look for:
- Extreme devaluations on bad news
- Small caps than can leverage big gains (percentage wise) on good news
- Kick-butt IPOs
- Buy while people are selling and the price is dropping
- Sell while people are still buying, and this is important; before the price peaks because you can’t predict exactly when that will be
So, while everyone was reeling from the talk of a financial system meltdown, my buddy Tom (Trader Tom), jumped on Bear Stearns yesterday like a fat kid on a smartie at $4. This morning, he jumped out at $6 and made a quick 50% on his money. Not bad for a days work.
He could have done better ($8), but greed will kill you in this game. If you’re patient and conservative you will more often than not, make money.
And the best part … he’s buying lunch.