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Investing For Success: Having A Plan

In a recent article by author, Regarded Solutions, "Do Not Let Bad Habits Derail Your Retirement," the author makes some very interesting points and food for thought.

He says that investors might have more success if they can remember to avoid certain behaviors that he calls "habits."

Regarded Solutions warns against:

Fear, greed, getting married to a stock, and not taking profits when applicable.

The commentary was very interesting and seemed to indicate that there were a lot of newer investors visiting the article and leaving their comments. My own thoughts on some of these comments has to do with how so many new investors often have some very simplistic methods and practices when it comes to investing. I wrote a comment of my own and would like to share it here.

I said:

Way to many people, from the commentary they share on these threads take a very simplistic approach to investing their money.

Dividend Growth stocks, obviously have to have "dividend growth" and an accelerated dividend growth rate must mean that the company is a candidate for a purchase.

Not.

Other people focus on PE and believe that a particular stock is a buy, because the PE is below 8 (or some other arbitrary number).

Not.

Some people believe that a company that pays an 8% or better yield must be something they need to own. I mean, at an 8% yield, look at how that particular stock can increase their portfolio's overall yield point.

Not.

It has become somewhat concerning to me about the number of people who invest in the market and who have absolutely no idea how the market works, how to value companies, or even what their short term and long term goals are.

In much the same way as people in the 70's and 80's were buying real estate, "because it can't lose" were left holding the bag when they thought that real estate (single family homes) would have the same dynamics in the 2000-2013 time period as they did in the 70's and 80's.

For many people, as you point out, perhaps having a financial advisor might be a very good idea. For those who don't like that idea (a new heresy coming), they might consider Index funds or mutual funds that invest in equities.

Investing in individual stocks is not a game. It's a job. Especially when you have a portfolio that has reached critical mass (that is 100k or more from my perspective.

While I don't agonize over my portfolios every day, I do pay attention to them on a regular basis, but my primary activity is looking for stocks that make sense as additions to my own portfolios.

I have a mission statement for my stock portfolio "business." I have a set of objectives to help me execute that mission statement. I spend a lot of time investigating stock opportunities and look at individual stocks as they might apply toward my mission statement and my objectives.

That comes with time and experience. It really is a little more complicated than what some people think and those who take the view that stock market investing is "easy" or it's like "finding money in the streets" are in for a very rude awakening.

Dave