NEW YORK ( TheStreet) -- You can burn cash in all sorts of ways. Take up a hobby. Develop a habit. Rescue too many pets. Have too many kids. While you cannot put the one that snuck past the defense up for sale in the rotten kid auction, you can avoid losing money in the stock market.The blame we like to direct toward "fat cat bankers" and rich CEOs notwithstanding, you can protect yourself from losses with hard work and, maybe more importantly, common sense. It also doesn't hurt to use readily available tools. For instance, you buy 100 shares of a $15 stock. You tell your spouse you just risked $1,500. Not so: Risk equals the difference between your cost basis and your stop loss. One size does not fit all, but to avoid catastrophic losses, be ready and willing to take a series of small losses when things do not go your way. That's not rocket science. Losing money comes with the territory in trading and investing. The winners just do a better job of managing (or they actually manage!) their capital. As we learned the hard way with the Facebook ( FB) IPO, use public information. Never buy a stock without scouring its public filings, particularly a couple years' worth of quarterly and annual reports. Had more people read through Facebook's S-1 filings, we might not hear so much whimpering and moaning. Do unconventional due diligence
If I have learned anything during my time in the media, it's that it generally pays to do the opposite -- or simply not do -- what talk radio show callers and message board commenters say you should do. Consider Sirius XM ( SIRI). It might as well be a sports team. Not only is almost every message board comment made by a Sirius XM bull emotionally driven, but many come from people with vanity plates for screen names. SiriusBrit. Siriusman. Sirifiar. SIRI Dog Millionaire. siriusenough2012. serious business. Siriusly Undervalued. And my personal favorite, Sirius Love. I did not make any of those names up.
Buffett made a fortune on beaten-down and poorly understood stocks. We are both at this point, but as EVs roll out over the next 24 months our value propositions will become clear and be validated.Read still has about 18 months for his prediction to come true, but since his email on Jan. 24, ECTY has plummeted 51%, from $1.12 per share to 55 cents. If things do not improve drastically between now and November, Nasdaq could delist the stock. I have been approached by and have approached quite a few company founders, CEOs and other high-level executives. From time to time, these interactions make me incredibly bullish. On occasion, however, they turn me off. If you need to compare your stock to a Buffett pick and defend it like a Browns fan calling into a sports talk program on Monday morning, I'm concerned. But, even more so, as I noted last month, Don't Buy Sectors; Focus on Business Models, Target Markets. You might love satellite radio. You have a lifetime subscription. Read knows his industry inside and out. Like any good CEO, he's a confident chap. It's all good; but stock prices get depressed for the same reasons as people. Underlying lying reasons almost always exist. Underlying reasons explain why Tesla Motors ( TSLA) performs relatively well. And it's not because the company produces electric vehicles. Instead, it's because Elon Musk is a brilliant visionary. He and his team have done and will continue to do an excellent job serving a niche market of affluent types who will plunk down fifty grand for a Model S just like they did 110 grand for a Roadster. If somebody, from chronic commenter to company CEO, tells you they have a "cheap" low-priced stock all because of misinformation, misunderstanding or manipulation, hop in your EV, crank up E Street Radio and drive away as fast as you possibly can. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.