Street Sense: The fundamentals of stock market investing
Why Some Stock Investors Lose
Investing in the stock market carries a degree of risk, but having the wrong attitude will almost guarantee losses.

BY JERRY HELZNER

"Can you give me the name of a stock you like? I've got about $5,000 that I can afford to lose and I want to put it into the stock market."

Now there's an investor with the wrong attitude. Unfortunately, I hear that from people all the time. It's like someone wanting to go skiing because he's got a leg he can "afford" to break.

I can't guarantee that you'll be successful in the stock market, but it certainly helps to go into investing with a businesslike approach. That means accepting a certain degree of risk, but doing everything in your power to know the facts that are relevant to a specific stock investment. Once you know the facts, you can make an informed decision as to whether the potential reward outweighs the risk you'll be taking.

Some investors never recognize that stock investing is simply a process of evaluating potential risk vs. potential reward. They see every investment as some sort of fingers-crossed plunge into the unknown, in which hope and luck are the ruling factors that will determine success or failure.

	ILLUSTRATION: PHILIP HOWE

COULD THIS BE YOU?

I'll give you a quick profile of someone who loses in the stock market:

The stock market loser is an individual who gets his investing ideas through tips from friends. These tips are usually imparted at parties, bars or on golf courses.

The loser's ears perk up when he hears about a company that's about to unveil some startling new and unproven concept that will change the future of the human race. For example, thousands of stock market losers lost their shirt (and probably much more) a few years ago when a company called Charter Arms said it had perfected the self-chilling beer can. Only the mindless investors got chilled on that one.

The loser is happiest when he can buy into a stock that's already doubled or tripled. For some reason, the knowledge that a stock has already become wildly overpriced makes the loser more secure in the knowledge that he's onto something that's very good.

Interestingly, a loser is also happy if he can buy huge amounts of a stock for a few pennies a share. This reinforces his "It's all a gamble, so what have I got to lose" mentality.

The loser likes to hear a target number for his stock. If the tipster says XYZ is "going to 100," it gives the loser a sense of security that everything is on track to hit the intended target price.

The loser also likes companies that issue lots of press releases that almost always involve predictions of great things to come. The flood of press releases is very reassuring to this type of investor, though in most such cases there's little substance behind all the positive news.

TAKE A WINNER'S APPROACH

If you've had these loser traits in the past, get them out of your system right now. The truth is that no one has $5,000 they can "afford" to lose. Even if you don't put the $5,000 in the stock market, there are a lot of good things you can do with that money. So don't squander it.

Be as serious and as thorough with your investing decisions as you were in deciding where to locate your practice. I'm sure you didn't make that decision based on advice from a guy you had just met at a party. And I'm certain that you had a folder full of facts in hand when you chose your practice's location. Your stock-picking should be based on the same kind of solid information gathering.

And if you don't have the time or the inclination to research stocks on your own, get a broker with a proven track record to do it for you.

Ophthalmology Management Associate Editor Jerry Helzner has written more than 50 articles on stock investing for Barron's. He has been a regular stock market columnist for other business publications and was a member of the equity research department of a major regional brokerage firm.