When people learn that I work at TheStreet, they invariably want my opinion on either cryptocurrency or a stock that I've never heard of. Few people ever ask about any of the many publicly traded companies that have giant names. Or, to explain it more directly, instead of asking for my thoughts on Tesla (TSLA) or Microsoft (MSFT), people usually want to know about some obscure penny stock that might sell some part to Tesla in the theoretical future.
That's largely because most people view the stock market as a giant game of roulette where some people have a system that lets them know when "8" might hit. And, some people might be good at that, but the reality is that most people won't make money investing or get rich by being smarter than the system.
In fact, chasing short-term gains is about as effective as playing roulette, and, for most people, the secret to making money in the market is not finding the next big thing before everyone else does. It's actually identifying good companies with strong long-term plans for growth.
The problem -- and it's a big one -- is that trading is exciting and investing is boring. Buying a penny stock that owns a rare Earth magnet mine in some exotic location sounds exciting while buying Starbucks (SBUX) stock because people like coffee and the company is really good at selling it.
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Why a Bad Stock Market Week, Month, or Year Does Not Matter
Bad news about banks drove the stock market down on March 10. Failing banks are, of course, a terrible thing that might say something about the broader economy. But, when you look at your portfolio, you should look at every stock you own and ask, does this news change my thesis for this stock?
Your thesis is the reason you own shares in a company. That should not be a price point, what a chart says, or because someone you know told you something positive about the company. You should have a clear reason for why you own shares in a company.
For example, I own shares of Planet 13 (PLNHF) , a cannabis retailer with locations in Las Vegas and California with plans to expand in Florida and Illinois. This is by far the most speculative stock I have ever owned, but the company has strong management and a distinctive approach to selling a product that's very hard to differentiate.
Planet 13 has also laid out a blueprint for its next decade and while its share price has suffered, it's moving ahead with its plan by doing exactly what its co-CEOs have laid out. The results might take years (and a lot of things can go wrong) but nothing that happened in the stock market today, this month, or the last 12 months has caused me to not believe in their plan.
I can apply the same logic to every other stock in my retirement account.
Why I Invest But Don't Trade
A lot of people make money by actively trading. We have a wonderful service at TheStreet, Action Alerts Plus, that shows you how they manage their portfolio and lets you know when to make certain trades.
In my case, my timeline is long and I have very little interest in having to actively manage my own portfolio. So, I invest in shares of companies that I believe have a roadmap for decades of success. It's boring to own Costco (COST), Starbucks (SBUX), Microsoft, and Walt Disney but those companies have shown me they can succeed in the long term.
Short-term stock market moves often have very little to do with reality. The above-mentioned banking crisis dragged a lot of companies' share prices down but in the long run, what happened actually won't materially impact those companies.
Being an investor is a lot like slow-smoking barbecue. You want to touch the meat, see how it's going, and otherwise be involved, but the best thing you can actually do is nothing. Time is your friend and good companies usually (eventually) have share prices that reflect that.
