Investing for Dummies
By Stanley Bing

(FORTUNE Magazine) – PEOPLE SMARTER THAN YOU AND ME are constantly advising us on ways to put our money where the sun doesn't venture, and yet we lunkheads continue to earn negative returns on just about everything into which we sink our fortunes.

Take my investments, for instance. I'm begging you. But seriously, folks, I love my portfolio. And I never made a move I didn't think through. That's the sad part. Because today I have 35% less money than I did when I first plunked my shekels into the market. I'm underwater, looking up. And you know what? I didn't make one stupid investment. Nope. They were all really smart.

If you listen carefully, I'll help you be equally prescient. No, don't thank me. If you listen to my advice, that will be thanks enough.

First, you have to read the big picture. The market is a moody beast. Sometimes its nose is out of joint, and you have to plan your strategy accordingly. Other times it's dragging its tail like a distressed dog, and that means a different approach. Recently I've backed off my underperforming blue chips--acquired during the post-Internet bust that mandated more conservative investing--and once again have taken the plunge into underperforming next-wave technologies. I fully expect the macro-climate to reward me as it has in the past.

After you've read the tea leaves, don't stint on the research. This means paying close attention to the analysts who led you astray in the past, and keeping a beetle-eyed view of the financial press, including magazines like this one, staffed by people who are just squeaking by.

Then it's important to talk with rich people, who are, I believe, the best experts of all. In this group I would place the financial advisors who make their living preying on rich people. They will often tell you where to put your money if you have a minimum of, like, 100 grand to lay on each wager.

As you move forward with your battle plan, be careful to follow the old saw--bet with your head, not over it. As much as we like to think that investing is a science, it is also a form of gambling, you know, and gambling is addictive and emotional. If you've ever seen a loved one or an associate sitting by CNBC or a Quotron all day, screaming into the phone about wins and losses, getting angry instead of taking a nap or an additional Xanax, you know how close to mental illness most investing activity is. There's a thin line between an institutional investor and one who should be institutionalized.

That's why it's important to put into the market only what you can afford to lose, the way you do in Vegas. Too many people put all their eggs in the speculative basket and then run around like madmen when the basket catches fire, cooking their eggs before they have a chance to hatch.

And that beautiful moment when the chick pops out of the shell is, of course, what the process is all about. To witness that miraculous birth, you have to possess the essential attribute of every successful money manager: patience. How many day traders have sunk their bucket by perching over the keyboard pushing funds from one venue to another before they had time to ripen?

There is, however, a difference between ripeness and rot. It's possible, in short, to be too patient. I bought a security that shall remain nameless on very good authority when it was at 28. It had nowhere to go but up, except it went down. I was very patient. I waited until it hit 20, and then hung around for a while longer, until it got to ten, then eight. When it finally went down to $2.75, my patience gave out, I recouped my investment, and I saw a very nice little deduction on the loss. The pathetic part is that it made me feel as close to being a winner as I had since my Time Warner shares, which I purchased at about $70, bottomed out in the single digits and began the long climb back. I'm being patient with those too, but I plan to learn from my mistakes and sell them right before they take off and zoom upward.

When housing was at its absolute apex, I bought a place. Within seconds it was worth $50,000 less. Right before the new media bubble pooped, I popped for a bunch of high-tech stuff. Oops. Not long ago I bought an eight-cylinder car that gets 16 miles per gallon on the highway. Within nanoseconds, gas was $4,000 per gallon. Now it's down to only $2,500 for the 87 octane, so I'm feeling a little better, but you get the point.

Don't do as I say. Don't do as I do. If I act, wait. If I wait, act. That's the best advice I can give you, and I think it's pretty good. That, and one more thing: You can't lose if you don't play. So get out there and buy a really nice lunch. That's an investment, in my experience, that never fails to exceed expectations, no matter how hard it may be to digest.

STANLEY BING's latest book, Sun Tzu Was a Sissy: Conquer Your Enemies, Promote Your Friends, and Wage the REAL Art of War (HarperBusiness), is available at finer bookstores everywhere. He can be reached at