Stock Market Fever: Catch It!
Have you heard the news? Stocks are on fire! The market keeps going up and up with no end in sight!
Unfortunately for you -- if you're reading this -- you're probably the type whose idea of an "investment" involves buying something with earbuds, you gullible, materialistic short-sided hipster scumbag sap! You need to stop buying overpriced glossy gadgets in a vain attempt to fill your empty heart with happiness, be responsible, and start thinking for the long term! So here's some down-home no-nonsense advice that'll whip your financial future into shape.
RULE #1: YOU CAN'T PUSH OUT THAT BABY UNTIL YOU GET PREGNANT
Once the Dow hits 12,000, you're going to start to hear analysts on TV saying how "the Dow broke its water." And after that water breaks, you can bet a big golden egg is going to hatch that money-baby into your bank account!
But as we all know, humans do not lay eggs. Which is why you will need a "nest egg" before you start to play (or LAY!) the market.
In order to "get pregnant" as it were, you need to knock up a couple of retirement accounts. The idea of saving for retirement may sound ludicrous to those of you that still live with your parents and sustain a meager existence via selling video games on eBay, but if you don't start building that nest egg for the future, you'll end up to be an omelette of failure and cheddar cheese but mostly failure. And I also really like mushrooms in omelettes as well, but this is irrelevant unless you are living in the Mushroom Kingdom, in which case you should only invest in coins and not trust Toad with any of your money because he's a con man with an addiction to Goomba hookers.
There are three basic types of retirement accounts. Pick one and plant your seed into it as hard as you can:
- 401(k) – The chances of you having a job where your employer actually offers a good 401(k) plan (with matching) are pretty slim, so let's just ignore this. Besides, 401(k)'s are confusing because all your money is converted to metric. The “k” in 401 “k” is kilograms, because 401 kilograms is the maximum weight of money you're allowed to store in your 401(k) without incurring a tax penalty. But if you are investing in a 401(k), at least you'll be a market “liter!”
- IRA – To some people, IRA means “Individual Retirement Account” and to others it means “Irish Republican Army,” so make sure you're investing in a collection of mutual funds and not a collection of drunk Irish terrorists.
Now with an IRA you'll need to pick some mutual funds, but don't worry about it, they're all basically the same. Just pick whatever name sounds the coolest. With the stock market going the way it is going, the difference in funds is incredibly negligible. I like funds with names like "index" in them because these funds are linked to web pages and it'll be really easy to track your financial progress.
IRA's are a great way to save for retirement and you even get a tax "beak" for "feeding it worms," as it were.
- Roth IRA – Just like a regular IRA, except you can only invest in these if you are Jewish.
RULE #2: IT'S A JUNGLE OUT THERE... BUT ALSO A ZOO
As you've probably noticed, a good knowledge of animals is important if you want to succeed in the stock market. We've already talked about birds and nest eggs, but you've likely heard of "bull" and "bear" markets as well.
Many people simply select their favorite animal and tell their stock broker to only buy stock related to that animal. This is not a good idea. What you're going to want to do is invest in a select few individual stocks. Getting back to the whole bird thing, some people say this is "putting all your eggs in one basket." Well if the eggs are already in someone's basket, that means they're out of your nest... meaning someone just stole all your money. Looks like someone failed to protect their eggs from poachers, BLAMMO!
Now that you've built your nest and started working on your eggs, you can start fortifying your nest walls with "twigs" or "stocks." Get an account at E*Trade or one of the many other online brokerages. Find a stock that you like. Then invest one "unit" in it.
How much your "unit" is depends on how much money you have to start with, but in general each unit should be 10% of your total investment capital. If you start with $1000, that means one unit is worth $100.
So invest one unit in your first stock. Then invest two units in your second stock. Then invest four units in your third stock. Then go back and spend your remaining units on the first stock you invested in.
This is called "diversification" and makes a lot of sense. If your third stock fails (this is called "catching the bird flu"), that's OK because you'll be covered by the gains of the first and second stocks. If your second stock fails, that's cool because the third stock is worth double. If your first stock fails, you're still covered because you only invested a little bit to start.
Things really start getting exciting when the stock splits and pays you dividends. Dividends are a percentage of the profit made by selling off pieces of the stocks when they split: when stocks split, the original unit of stock is split up to eight ways and sold for the same price as the original stock. Any profits from a stock split, after paying out costs and a 5% commission, is paid back to you via dividends.
So the key to making a lot of money is to buy stocks that will split a lot. Part of the reason cocaine was so popular on Wall Street in the 1980's was because people liked to split coke into various lines and snort them up their nose using mirrors. Which is ironic because this activity "mirrored" the frequent stock splits that were occurring on the market during this time. Don't do cocaine though because that's one of the many stupid things people did the 80's that they regret doing now.
RULE #3: KEEP THE CHANGE AND BE HOME ON THE RANGE!
Since the stock market is all about the animals, treat your stocks like a pet: check on them often to make sure they're well cared for. And keep them securely locked in a cage. Monitor the prices of your stock closely. If your stock grows more than four units more than your initial investment, that means it's gotten "too big for its cage" and you'll have to "let it it out," or sell it. Invest the profits in a new stock. Beware of "reverse vampire stock" which is stock which has already had the blood (or value) sucked out of it. These will never go up in value. If your stock loses more than six units, that means your stock is dead. Sell the remains and re-invest the remainder in your first stock. Unless your first stock died: then you should reinvest in the third stock.
You can buy stock in more than three different companies, but in this market... you really shouldn't need to. At this point the future is so bright that basically any stock you buy is guaranteed to go up in value. The economic future of the entire world is blindingly bright thanks to the unprecedented huge amount of peace and prosperity all humans are currently enjoying. So go out there, buy some some stocks QUICK, and catch stock market fever before it "flies the coup!"