50 things I learned about the stock market in 2016

Everything I know about the stock market today is from reading blog posts, 160 character tweets, and looking at charts shared by thousands of traders and investors across the Internet. Almost all of them I only know by their digital names.

I don’t know if that’s awesome, or sad, or cool, or maybe just something fun and ephemeral.

But what I do find interesting is how this will potentially shape markets in the future. Especially how people learn about them. I’m not sure what the word is for my method of learning, but it sits somewhere between open source and bullshitting with traders on their smartphones. No other time in history have so many traders and investors been online. This growth is probably only just getting started, too.

As 2016 comes to an end, I want to reflect on what I’ve learned about the stock market. I’ve made some really terrible calls throughout the year but I also got lucky a few times. In the spaces below, I’ve compiled 50 thoughts and lessons I encountered in 2016. I hope writing them down here will make me a better investor in the future.

  1. Don’t let the news cycle influence your decisions ever
  2. Hold the “biggest” names in the stock market accountable or else you might be a victim of this, or even this, or sadly also this
  3. The Internet is awash with stress and anxiety for clicks and breaking stories — ignore it
  4. You will either lose money trying to trade based on headlines or gain several pounds trying to stay up to date with everything that’s going on
  5. Stock market hype always seems to be 10 years ahead of reality
  6. Always remember 3D printing stocks and $DDD, pharmaceutical stocks and $VRX, and shipping stocks and $DRYS when assessing hype in the market
  7. Story stocks are the most fun, but also the most dangerous
  8. Don’t ever make a story stock a long-term investment
  9. Don’t wait for a random idea to come to you
  10. You need to develop your own method for screening and searching for stocks
  11. One of the great mistakes is stumbling randomly across a stock pick
  12. Don’t read the Wall Street Journal and think, “I should buy that too!” — if it’s in the Wall Street Journal, the move has already been made
  13. It might feel like the world is melting down, but the stock market is still open
  14. If, for example during election night, you could put your emotions aside just for a second, there was money to be made
  15. ETFs and ETNs are not as easy as you think or lead to believe
  16. Not all ETFs and ETNs are created equal — read the prospectus
  17. Try your best to teach someone why you should never invest long-term in a 2x or 3x ETF/ETN
  18. You yourself should never invest in a leveraged ETF or ETN
  19. Prune your watchlist as much as possible
  20. Your watchlist is where your next great investment is
  21. Sector rotation is more important than any casual investor cares to believe
  22. Look at more weekly and monthly charts
  23. Never open a 1-minute, 2-minute, or anything minute chart again
  24. Bears and pessimists are better at using social media than bulls and optimists
  25. If someone says “P/E ratio” in their first few sentences while pitching a stock, don’t go near it
  26. Use moving averages to smooth out charts and a stock price
  27. Stop focusing on revenues and EPS, focus on free cash flow
  28. They are starting to advertise the teaching of cash flow in Harvard Business School ads — that should tell you everything
  29. Your greatest trades are the losers you cut the fastest
  30. Your mental capital is just as important as your actual capital
  31. Exercise helps your decision-making skills in the long run
  32. Your health is the greatest hedge against bad investments — hey that was a bad trade, but dang it feels good to run all those miles boy!
  33. Always remember the major indexes are weighted and sometimes just a few stocks can drive them higher or lower creating a somewhat “false” narrative
  34. The best stocks are those that have barely any following on social media and the Internet
  35. The hardest stocks to own are those that everyone keeps talking about all the time
  36. Holding cash is very underrated among stock market participants
  37. Holding cash is really hard to do if you follow the markets each day
  38. You can’t buy dips if you don’t have cash
  39. Cheap stocks can get cheaper, expensive stocks can get more expensive
  40. Scaling into positions is an investment in time — never buy a stock all out, at once
  41. Scaling into a stock slows down your decision-making
  42. You will never go broke with proper position sizing
  43. Don’t chase stocks
  44. There are 5,000+ stocks in the stock market, trading 5 days a week, in a market that’s been open for 100+ years — think about that the next time you think you missed a stock
  45. The best two skills you can acquire for your own growth as an investor (especially if you want to pass the CFA) are statistics and accounting
  46. Being a trader is sometimes better than being an investor… A trader is better at exiting positions than investors
  47. High frequency trading and algorithms need to be embraced — build your own, learn to make money against them, or learn how to ride with them
  48. A stock’s current price is only as good as the amount of trading volume that got it there
  49. Not following the Treasuries market is an error of omission
  50. If you can combine technical analysis and fundamental analysis, you are doing something many stock market participants are afraid to do and would rather argue over

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