An amateur, wanting to avoid gambling in stock, must do some studying. The main ideas for reducing the risks are mentioned below:
Avoid Egotism. Don’t borrow on stock; the price might drop and wipe you out. Diversify. Put part of your savings into common stock, the other part into fixed-price items cashable at any time without loss of dollar value. Own stock in a good many corporations. Check its marketability. Choose skilled management. Adopt rules on timing of your buying and selling stock. The time of action is a major risk in owning stock. Maintain a standard ratio between the current market value of your stock and your reserve. Also, buy and sell stock only in small installments, never moving a large portion of your principal within a short time. Review periodically. Don’t put stock away and forget it.
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