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Stock Investing in Baseball Terms


The 2016 Major League Baseball season opened up this past Sunday, and anytime I can use sports analogies for money I most certainly will. Today I want to look at investing in the stock market in terms of baseball. When you think about it, baseball and the stock market are pretty similar. Baseball is a challenging, momentum controlled game that you can play as long as you can until you win or lose. And there is quite a bit of money to be made in both…

Set a Good Lineup

In order to win in the stock market, you need a solid lineup. In baseball, a great lineup is never a bunch of a guys with similar skill sets. You have your guys who can hit for average, those who can hit for power, and those guys you play based on the specific match-up with the opposing pitcher. The stocks in your portfolio should be a similar story, you can’t play similar type of stocks and expect to win consistently. You’ve probably heard it too many times, but a diversified portfolio is a key to succeeding within the market.

So what type of players do you need in your lineup?

1. Gold

2. A dividend-paying stock with a high yield

3. Growth stocks

4. Speculative stocks

5. Stocks from a healthy geography

Cramer’s take is a solid start, though you don’t need to specifically need to go out and stock pick to fulfill this list. It is important to not live in one sector and to spread out among types of stocks (dividend plays, slow growers, etc).

Remember, they play 162 games in the MLB. Even if they win a lot, they still lose quite a bit. Check your ego and keep your portfolio strong, win or lose. Also, rosters round out around 25 players per team, keep your portfolio anywhere from 5-15 stocks depending on your capital in the market.

Play Good Defense

So you have a good lineup and think your offense will be able to produce. Well what good is that if you can’t stop the other team from scoring more? Defense in the stock market is just as important as it is in any sport. When I talk about defense in the stock market, I’m talking about not letting your bad stocks kill the gains of your good ones.

When your stocks drop and drop, what do you do? If your answer is “wait until they go back up,” you’re playing a risky game. As I stated earlier, you will lose, so it is crucial for when you lose, you don’t lose by much. How to do this is have a specific point where selling is the automatic move, whether it be at a loss of 5% or 10%. Another thing to take into account on this end is what your plan for the stock is, if it is a shorter term trade play, a lower percentage will be your limit. If it is a long term investment, likely a slow grower or dividend play, a drop may be a good opportunity to buy more shares. Every situation is different, and nothing beats good research on a stock.

Take Advantages of Scoring Chances

There may be a few times through the season where everything clicks and you blowout a team, but those games are few and far between. Most of the time you need to take advantage of your of your chances, and stocks are no different. Much like having your defensive game plan, you should have your offensive game plan as well. When things start going good, and your stocks start shooting up, would you rather be the guy that sold too early and profitted or held on too long and lost the chance to profit? I’ll just leave it at that.

"I never buy at the bottom and I always sell too soon." ~ Baron Nathan Rothschild

A good lineup, a little bit of defense, and some opportune scoring will win in baseball, and will help you win in the market. Good luck and get out there.

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