To students that are having problems when paper trading: I'm so glad you followed Rule #1 and stuck to paper trades.
Remember: Don’t Lose Money! Now let me see if I can help you find businesses that will go up and make you some bucks.
First, remember that the tools are just tools; it's up to us to make the furniture. Just like that, research data is just data. It's up to us to make the key judgments whether to not to invest.
Those of you who have technical indicators, don’t be falling in love with them. They have a limited value but will NOT make you any money unless you find a wonderful company and buy it at an attractive price. I use an acronym that keeps me out of trouble:
YUMMMMY
Y - YOU own the whole thing. YOU don't buy stock. YOU buy a business.
U - UNDERSTAND what you're buying, since you're buying the whole thing.
M - MOAT, the water around a castle or the durable competitive advantage of a business. What is their monopoly that gives this business a huge, predictable MOAT?
M - MANAGEMENT, especially the CEO, has to be honest and investor-oriented and see his company as his life mission. Google the company CEO and read about him in BusinessWeek or Fortune. Read Jim Collins's “Good To Great” about Level 5 CEOs.
M - MARGIN OF SAFETY (MOS). You cannot invest, in my opinion, without knowing the value of the thing you are buying. If you do not know it, you are gambling, not investing. I am only willing to pay half of value. That’s what Buffett is willing to pay, too. If we can buy a dollar for fifty cents, we are not going to lose money on the deal.
M - MR. MARKET is our partner. I wait for MR. MARKET to get emotional and give me the MOS price.
Y - YIELD, the rate of return we get based solely on earnings. I want to see a Yield that is at least as good as the current long term T-bill rate of return.
That's it. YUMMMMY. Then the group rotation chart, insider trading and technical indicators will be of some use to prevent short term losses in case you made a mistake.
Now go make a list of yummmmy companies and wait in the bushes to pounce on one of them when Mr. Market goofs.