Page 129

and to sell when it's time to buy, basically leading them to lose their money in the process. Patience, courage, and wisdom on the other hand are the hallmark emotional states of effective investors. These emotions have proven themselves over many decades as the only effective way to tame the living beast that is the stock market.

Due Diligence

I am sure many of you have heard of due diligence before. It is a widely used term in business and depending on its usage, it seems to have a variety of meanings. But at the heart of it, due diligence means one thing: doing the homework. Before you take a position on a stock you should try to familiarize yourself with the company, its operation, its history, its management, and many other aspects of it. I know this is easier said that done, and many investors don't bother with it, but why would you invest your money in a company you have no idea about? It is almost like driving blind, with guaranteed disastrous results. Jumping into a stock because it has been doing well or because someone recommended it is hardly a sane method of investing.

When it comes to stocks there are no guarantees and past performance does not indicate future results. Since you are putting your money at risk by investing in stocks, it only makes sense to mitigate the risk by educating yourself about the companies you are about to own (well, partially own). I am not about to suggest that you should learn about every aspect of the companies you are about to invest in. But it is wise to know a bit more about them that just their stock symbols. The following list would be a good start in educating yourself about the companies: …