No matter how thoroughly you analyze the options for potential investment,
no matter how much care you take in crunching the numbers, no matter
how much time you put into studying the stock market and the forces that
affect it, you’re going to make mistakes. A lot of them.
Don’t panic. Nobody gets it right all the time. In fact, excessive boasting
about returns and success rates is among the best ways a beginner can spot
the posers. Boasters become particularly aggressive during bull markets—
when many stocks are hitting new highs. Legendary investor Warren Buffett
once wrote, “Only when the tide goes out do you discover who’s been
swimming naked.” If you listen to the wrong voice, you’ll end up high, dry,
and possibly embarrassed when the market corrects. And don’t kid yourself
—it always corrects.
So before you buy into some pundit’s foolproof plan, do some of your
own work. In the next few chapters, we’ll talk about what you can do to
better your chances of picking winners—starting with valuation.
Weighing the Options.
