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Don't panic over a little bit of negative news from time to time. Nearly every company has an occasional setback. But, after you've bought the stock, continue to monitor the news carefully. Read the latest news stories on the company and make sure you are clear on why you expect the company's earnings to grow. If you don't understand the story, don't buy it. At the very least, know how much you're paying for the company's earnings, how much debt it has, and what its cash flow picture is like.
3) Do your homework. Study the balance sheet and annual report of the company that's caught your interest. My favourite view of the house. 'I normally get into my country get-up which I'm not in now. I've got a stick, I walk around, sit out here with a cup of coffee. I can also see Victoria if she's naked in the top window.' The reason is obvious: over time, good companies grow and make money; they can pass those profits on to their shareholders in the form of dividends and provide additional gains from higher stock prices.
Over the long haul (and yes, it's occasionally a very long haul), stocks are the only asset class that has consistently beaten inflation. "The whole thing is rigged." There may be just enough truth in those statements to convince a few people who haven't taken the time to study it further. "It's just a big gambling game," some say. One of the more cynical reasons investors give for avoiding the stock market is to liken it to a casino. Posh retorted that it 'wasn't a simple answer' before he asked her again what car it was.
She said: 'It depends but yes in the 80s my dad had a Rolls Royce!' - before David retorts 'thank you' and then leaves. Silicon Casino happened in 1994. While the market occasionally dives and may even perform poorly for extended periods of time, the history of the markets tells a different story.
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