Comfort Zone Investing: Keep It Simple ... Very Simple

Filed under: Microsoft (MSFT), Comfort Zone Investing

While investing can be as complicated as you'd like to make it (stochastics anyone? perhaps collateralized debt obligation swaps instead?), the basics are very simple, especially for stock investors. Here are a few questions you can consider before buying or selling any stock.

1. Does the company sell anything? Laugh all you want, but this one question (and its answer) can save you lots and lots of money ... and grief. If you look at most biotech companies, they don't sell anything except hope. They have no revenues, but their stories are fantastic. Investors can get carried away with the promise (not the revenues or profits) of these sometime miracle producers. Most often, the promise turns to pffffft; the stock goes to zero. If a company doesn't have revenues, it doesn't mean you don't buy it (though you should have very good reasons), it only means you buy very little of it ... if you must, and you can't help yourself, and you've temporarily lost your investing compass.

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Comfort Zone Investing: Keep It Simple ... Very Simple originally appeared on BloggingStocks on Sat, 30 Oct 2010 10:30:00 EST. Please see our terms for use of feeds.

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