With all of the investment options available in the stock market, these three stock trading picks should be avoided.
Not everything can be a diamond in the rough. Not all stocks can be the next hot pick that will make you truckloads of cash. Because the stock market is like the world of high fashion, I’m not going to turn my back on any particular stock but these stock trading picks should be avoided at all costs.
My first pick is the airline sector. The airline sector has been a chronic underperformer for a long time and there is no light at the end of the tunnel. The airline business model is tough because the cost of keeping you safe in the air is huge. Maintenance schedules, personnel requirements, the cost of jet fuel, the cost of airplanes and the many other overhead costs make the airlines lucky to break even on most days. Stay away from these picks. Don’t look back.
[ReviewAZON asin=”0743224906″ display=”inlinepost”]
My next pick is levered etfs. Levered etfs are the perfect answer to the get rich quick crowd because they allow you to cash in on the benefits of having much more money than you actually do. The problem is that the get rich quick mentality is the quickest way to trash your portfolio.
An example of a levered etf is one that gains twice as much value as the Dow Jones Industrial average. If the Dow goes up 1%, your etf goes up 2%. Sounds great doesn’t it? Sure, if you don’t lose money.
What happens if the Dow goes down 1%? You just lost 2% on that position. These etfs have part time stock traders for lunch every day. These funds only work if you are a day trader and much like a power tool you have never touched, these funds are for the advanced trader. The rest of us need to make our stock trading picks in place other than levered etfs.
My third unpick is overseas stocks. The cool thing to do is to invest in emerging markets. Go tell your friends that you are invested in emerging markets and you sound really smart. The problem is that most of us don’t understand how to do research on stocks right here in our backyard. If we can’t figure out the balance sheet of McDonald’s, how are we going to understand what is going on with a company in China? There are plenty of stock trading picks right here in Uncle Sam’s playground. Wait until you’re a stock trading genius before dusting off your passport.
If you don’t have the time or don’t feel confident that you can make the best investment choices, consider subscribing to a service like Action Alerts Plus where an expert like Jim Cramer is doing your research for you and all you have to do is buy and sell when they tell you to execute the trade. My secret is that I don’t have enough time to do all of my research so I let Action Alert Plus do it for me.
Are you tired of watching others make money in the stock market while your portfolio remains lukewarm? Click here to set your portfolio in to overdrive.
The first book I ever read about investing was Jim Cramer’s Real Money. Click here to go to the elementary finance bookstore to order your copy. You can also take a look at the book in the box above. Although the first book, it is still the book I reread once every year.