I Have a Small Account – Which Stock Should I Buy?
Which Stock Should I Buy?
A FindLeadingStocks.com member asked me a question that I know many people have, “I have a small amount of money but see a lot of opportunities, how do you pick which trades to take?”
There are a few points you should keep in mind that will help you overcome this issue and re-frame your thinking. It is important for you to know that even if you had all the money in the world there is no way for you to catch every winner so focus on finding a few good ideas and treat your portfolio the same was as if you were managing big money.
Treat Your Money With Respect-
I see a lot of people trade recklessly because they think they have a small account and don’t care about what happens. Keep in mind that your portfolio is important – regardless of its size. If you break your trading rules because you have a “small” amount of money than you are setting yourself up for failure. Because if you can’t follow your rules with a small amount of money than how will you possibly follow your rules when you have millions of dollars on the table? I tell everyone to treat their portfolio seriously and make the same decisions you would make if you were one of my portfolio managers and you would be fired for breaking your rules.
Accept Reality: There Are Infinite Opportunities & We All Have Limited Capital
I don’t care if you are the wealthiest person in the history of the universe. You still have to accept the simple fact that you will not be able to catch EVERY BIG winner. It is impossible. The good news is that you don’t have to and catching only one or two big winners each year can completely change your life. Really accepting this fact will relieve a lot of self-imposed pressure on yourself. You won’t get angry when stocks take off without “you.” That anger will contaminate your ability to perceive the next opportunity and then you will keep missing winners or stopping yourself out with losing stocks. Instead, accept that you are not going to catch every big winner and focus on finding one winner, then two…etc.
Align Yourself With The Market:
Your only job as a trader (or investor) is to align yourself with what is actually happening in the market. Everything else is noise. Most people try to be “right” and force their will on the market. That is one reason why most people lose money on Wall Street. The market is going to do what it wants to do whether you are participating or not, regardless of your size.
Define Your Universe:
There is no way to know for sure which trades are going to work and which ones are not going to work ahead of time. That is a simple fact of trading. The faster you accept this fact the better your results will be in the market. It is also important to understand that there are infinite opportunities to profit every minute of every day and we already said that you can not catch every winner. So the question you have to ask is not what should I do about missing stocks; it is, how do I own winners? Once you define your universe and adhere to your rules you will be able to align yourself with the market and accept the fact that you can not dance with every girl at the party. It is not even necessary and trying to dance with every girl will cause you to miss (or miss handle) the girl that is right in front of you.
