This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Apprenticed Investor: On Bended Knee

Let's assume you found a stock that meets all of your criteria and fits our checklist . Before you pull the trigger, we need to discuss your relationship with this stock.

That's right, whenever you buy an equity, you enter into a complex relationship -- with the stock, the company, its management, even your fellow shareholders.

Before your purchase, you are still in a flirtatious stage -- you have no history with the stock and therefore no baggage. That's the time -- before you get in too deep -- to lay out some ground rules governing this relationship.

What you need is a pre-nuptial agreement with the stock.

There are several reasons to create a document governing your affiliation with a stock.

The first is objectivity: Once you own something, you lose the ability to take a cold-hearted look. You've become invested in the company, literally and figuratively.

After you've (hopefully) invested serious time and energy before deciding to make a purchase, you become emotionally invested in the trade. Emotions are the flip side of objectivity, and they rush in to fill the void when objectivity is lacking. A stock isn't Old Yeller , but you would be surprised at how hard it is to make a clean break. (A prior column detailed the danger of emotions.)

By having a clearly defined set of parameters regarding how long you are going to hold the stock, and under what circumstances you will "file for divorce," you avoid making emotional decisions to either sell too soon or not at all.

The second reason is discipline, one of the keys to successful investing. All traders know that without discipline, even the best investment plan is worthless. In the classic investing book Market Wizards by Jack Schwager, the theme of discipline comes up repeatedly in interviews with traders of all sorts: commodities, stocks, currency, futures and fixed income.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $111.31 0.48%
FB $92.80 -1.29%
GOOG $645.44 0.62%
TSLA $241.46 -1.91%
YHOO $30.96 0.34%


Chart of I:DJI
DOW 16,790.19 +13.76 0.08%
S&P 500 1,979.92 -7.13 -0.36%
NASDAQ 4,748.3610 -32.9030 -0.69%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs