Taming the Money Sharks: 8 Super-Easy Stock Investment Maxims

Chapter 2

Select an Industry to Increase Probability of Profitable Investments

Apply Expertise from Work or Personal Interest

Combine investment with work or a personal interest.

A. Basic Knowledge

Stay with one industry or only a few. Don’t just invest without any basic knowledge of an industry or sector. If you already have some basic knowledge and then take advantage of your expertise and related business trends, you will make money much more readily.

Investment is unlike shopping. Shopping for variety is fun, but for investment activity, focus is needed, which then leads to profits. That’s when fun comes automatically.

At this point, you might feel that my suggestion to invest in one or two industries would totally violate the most basic investment principle: investment risk diversification.

In response I’d say it depends on your investor profile. If you have all the superior conditions, including

• A lot of time
• A lot of energy
• Ample investment funds
• Superior financial analytic skills

then, by all means, if you wish to invest in 10 or 20 industries to spread the risk, go ahead.

However, given that most individual investors do not have the resources of large institutions, they should “conquer” one industry at a time. After you feel knowledgeable about one industry, then certainly you may add another industry for diversification.

To test whether you are ready to invest in an industry as an “expert,” you may wish to “paper trade” first—that is, simulate buy–sell orders on your ...