Let me show you an example of what I mean from last week before Apple (AAPL) announced its earnings. Now Apple is one of the most followed and talked about companies on the planet and earnings time is met with much anticipation not only from shareholders but by the whole technology industry. Apple has changed (improved?) our lives with their products and A LOT of people are interested in their every move.

You have to live under a rock to not know that Apple stock has done very well over the last handful of years and a lot of people now own the stock. The only question is though, will they continue to beat their earnings estimates and will the stock continue to go up? There are all sorts of opinions about this but most stock analysts have a buy rating on the stock and most think it will go significantly higher. But for it to do that, every earnings announcement needs to be great and thus the anticipation and hoopla.

My investment strategy is pretty much one of buying and holding stocks that I think are good until I decide it is time to sell. Not much fancy stuff from me like shorting, using call options, puts, put spreads, bull put spreads and all the other stuff you might see in articles like this one or this one that came out right before Apple’s earnings. Those articles can make your head spin!

Buying stocks and making money over the long haul is easy at its core: buy stocks you think will do well and sell them at a higher price than the price you paid. You don’t need to get involved (or even learn) all the different things like the ones mentioned in those two articles. You don’t need to try to time the market. You don’t need to figure out whether a stock typically goes up or down after earnings. You don’t need to “protect yourself” right before or after earnings or at any other time. You don’t need to do anything other than to always try to pick winning companies and that is hard enough in itself.

Admittedly there is more hype about Apple stock than any other stock and so there is more news and articles detailing all the different strategies you might have. However, for most investors, trying to do what those articles and ones like it describe is just silly. There is no need to be confused and intimidated by all those fancy stock terms and thinking you should be doing those things will probably only get you in trouble. Those strategies are for investors who have been around a while and know what they are doing. I mean, REALLY know what they are doing.

If you are like most investors, sticking with the basics is the best option in my mind and the basics are buying low and selling high. Simple as that. I’m not saying you shouldn’t learn as much as you can and try to understand new terms and strategies because you can and should. However, you should do that AFTER you get familiar with the basics and you shouldn’t let the prospect of learning all that new terminology get in the way of you putting your first dollars in the stock market.

The one thing that I want you to get out of this article is that these two terms are total judgement calls by the person making them. There is no technical analysis that can really say that a stock is overbought or oversold. I may think a stock is oversold and you might disagree because you might think things are better with the company than I do. Its my opinion vs. your opinion.

See the chart below of the last three years of Netflix (NFLX). This is the best example of a stock that shows possibly being both overbought and then going down so far so fast that it becomes oversold (my judgement).

Netflix was in the news a lot in 2011 as the stock went from about $50 in 2010 to just over $300 in about a year and a half. It was a hot stock that was shorted furiously by many investors as they believed it was not worth anything near its valuation. Yet it kept going up and eventually they were proven correct that it was overbought.

The steep sell off in 2011 brought it from it’s highs all the way back down to about $60 a share in a matter of months, prompting some analysts to say that they then thought the stock was oversold. Yes, they said, the sell off was warranted but not to the degree that happened. Since then, from it’s lows the stock has now climbed back to about $100.

The terms overbought and oversold help to illustrate how the stock market is at least partially influenced by people’s emotions. When Netflix was going down, people panicked and couldn’t sell fast enough. They just wanted out no matter what. I’m sure many people sold with this frame of mind until it got to the point in the $60 dollar range where enough people started to realize that maybe the stock had gone too low and was oversold. Emotion and panic often are responsible for stocks that go up and down too fast.

It is great if you can find stocks that you think are overbought (if you like to short) or oversold if you want something that has a good chance of going up. Oversold stocks can be good short term money makers because they are at a level where most of the risk has been taken out. However, as I mentioned up top, making the “oversold” or “overbought” analysis is a judgement call on your part or someone else’s.

I made a mistake back in the middle of 2008 when the economy really started to go south. I could see that things were getting ugly and I wanted to put money in something that should do well in troubled times: gold. Gold is often seen as a hedge against everything bad and it has historically performed well when the economy was rocky. I decided that I wanted to put some of my money in gold but I didn’t want to go out and buy actual gold bars or coins. They are too much trouble and of course you have the problem/risk of where to safely store them if you buy it in that form.

I have said many times that I got my start buying stocks with the guidance of my Dad and what he taught me was invaluable. Every child should be as lucky as I was to have a Dad that knew enough and cared enough to teach them about investing. But alas, not everything I picked up from him was correct.

I am sure I got the idea from him that buying gold stocks (mining companies) was essentially the same thing as buying gold itself. Maybe not exactly the same thing he told me, but good gold mining companies often mirror the price of gold. If you think about it that makes sense. After all, gold mining companies are looking for gold and as its price goes up, what they are digging out of the ground has more value. If the cost of gold goes down, the “product” these companies are mining has less value and their stock probably will go down.

Because 2008 was shaping up to be a terrible year for stocks, I wanted to buy gold and I ended up choosing to buy shares of Kinross Gold Corporation (KGC) and I got in at somewhere around $19 a share. I figured if gold continued to go up, so would shares of KGC and I wouldn’t have to bother with buying physical gold. Great for the lazy part of me.

Well, today on 2/17/2012 I woke up to see that KGC was down more than $2 overnight on their poor earnings report and now sits somewhere around $10.50 which is down about 45% from the $19 price I bought it at more than 3 years ago. Here is the ugly Kinross Gold chart for the last 3 years:

And how had gold itself done in that time period? It has just about doubled in value and made investors in it VERY happy. Here is the 3 year chart of KGC which I bought and real physical gold, which I never bought:

Obviously I now realize that buying stock in a gold mining company is NOT the same as buying gold. There are a lot of variables at play when you the stock of any company and any or all of those variables can hurt (or help) its price over time.

In Kinross Gold’s case they are down because of higher labor costs, higher mine expenses, higher production costs, a one time accounting charge, and just not a great year at finding gold. These things have all offset the fact that the price of gold has gone up to about $1900 per ounce at one time and now sits at about $1650.

This is not a mistake I will ever make again. Investing in gold is clearly very different than buying stock in a gold mining company. Lesson learned.

Each companies 401K plan is different but they all have a lot of similarities. For instance, there will be different investment options within the 401K that you can choose from. You will also have to choose what percentage of your money you want in each investment option. Some plans have more options than others but they all have different stock funds available.

In my 401K plan I have approximately 25% in a growth fund, 25% in a value fund, and 50% in a couple of blended or mixed funds. I used to have a higher percentage in the growth fund but as I grow older, I have balanced things out a bit more. The important thing to take note of is that even though I am not picking individual stocks (few 401K’s allow you to do that), my money is still in the stock market. And if you have a 401K plan your money is most likely in the stock market too.

During the stock market plunge of 2008 and 2009, anyone with a 401K plan was losing money. THAT was a lot of people who lost money almost every day even though many of them had never learned how to buy stocks in a brokerage account. You might think that stocks and the stock market are only for rich people but that would be an incorrect stereotype that is put forth by people with a political agenda.

This is just one reason why the Occupy Wall Street protests are so silly: these (mainly) youngsters are protesting against companies we all own and are part of. Regular every day people (who work and have families) own stock in thousands of of the big companies that the protesters hate. OWS wants to protest and block those companies from doing business but who are those protests really hurting? They hurt regular working Americans.

The stock market is vital for keeping companies in business and making our capitalist society work. It is wonderful that so many hard working middle class people have access to the stock market and own stocks in their 401K plans. If they would spend additional time learning how save and to invest even more of their money, I doubt we would have the impeding debt crises that we are facing today.

The Dow Jones Industrial average is made up of 30 such stocks that are all considered to be blue chips. This is the index that is measured and thought to be a good gauge of the market overall. All the names in the Dow are large solid companies that most people have heard of before.

However, It seems to me that you used to hear a lot more about blue chips 20 to 30 years ago than you do today. In fact, while watching any one of the national finance shows on CNBC or Fox Business, I rarely ever hear the term anymore. This leads me to the question whether blue chip stocks really exist today?

I remember my father telling me when my uncle died 15 years ago that he had done well for himself because he had invested much of his money in blue chip stocks and let them sit. The old buy and hold strategy that used to work well if you bought solid, reliable companies. Today though, it is much harder to find such companies as the business world is changing at a much quicker pace. Buy and hold isn’t as reliable anymore either.

Look at Xerox (XRX): that used to be a big blue chip company that is now a small fraction of what it once was. How about Borders Group (BGP): a big reliable company for years that is now out of business. Citigroup (C) is another company with a big name and years of history that is now worth hardly anything compared to what it once was worth. Unfortunately I own some Citigroup stock.

There are lots more examples but my point is that it is harder today to build a company that you know will be around years from now because the world is changing so fast. Technology is largely responsible for that and none of us know what will become obsolete tomorrow. Kodak is an example of a blue chip company that had a great business but their technology was pushed aside for something better and they were unable to adapt. The result? Kodak is now near bankruptcy.

The whole “blue chip” definition seems to revolve around the thought that those companies are solid enough to stand the test of time. You can put your money in them and be able to sleep well at night because you know they will be around tomorrow. But I wonder whether any company really fits that bill anymore?

Companies that are doing well today seem to be vulnerable to competitors who might come up with a better or cheaper way of doing things. Computers, the Internet, and outsourcing are really changing the business world and every company has to be on it’s toes in order to stay ahead and not be over taken. Now more than ever before in history is this the case. New technologies are showing up in every industry and what seems to be a reliable business and a blue chip stock may not be in the future. That is why I think the era of blue chip stocks is dead.

However, only four more days of trading are left in 2012 and it is a good idea to take a last look at whether you will be reporting a gain or a loss for the year. The market was very choppy this year and that means most people will have both stocks that performed well along with stocks that went down. This is the last chance to sell your losers and take the $3,000 loss for taxes if that is something you want to do.

Being allowed to only take a maximum loss of $3,000 per year on stocks is one of the rules I am most upset about. Our politicians make rules that are often absurd and this is one of them but they get away with it because in reality, it affects so few people. With the huge swings in the market as well as inflation over the last 10 years, a mere $3,000 is a laughably small amount and that number needs to be raised significantly. People who lost tens of thousands or more in stocks during the 2008 downturn are probably still trying to get tax credit for those losses. This is just another example of how self serving Congress is and how politicians DO NOT have our best interests in mind.

The last week of trading is usually light as many people are on vacation. Portfolio and hedge fund managers spend this time making last minute moves so that the stocks they want to show they own will be on the books for year end. This week or two after Christmas is when the Santa Clause rally typically takes place so the market may go up. But that is often a temporary bump if it happens at all.

2012 is a big election year and when you combine that with an ever faltering economy it means that stocks will probably continue to be tumultuous. Industry changing events are happening so often now that it is hard to keep abreast of all the news!

Although I have been buying and selling stocks for more than 30 years, unfortunately I am not immune from making mistakes. Some of them are mistakes that can’t be avoided like buying the wrong stock or buying the right stock at the wrong time. We all make these kinds of errors and most of them I can live with. The key is to make as few of them as possible and learn from your bad choices.

But occasionally I do something uncharacteristic and well, stupid. That was the case about a year and a half ago when I let my broker talk me into buying something I wasn’t comfortable with.

As I have mentioned before, I have three stock broker accounts (two that I manage myself and one that my Dad still manages for me) and I have various amounts in each one. With my Ameriprise Financial account, there is a person who is in charge of my account and listed on every statement I get. In August 2010, I had some cash in there that I needed to put somewhere but I did NOT want to buy stocks with because I wanted to keep that money safe. Totally safe.

Knowing that interest rates were next to nothing, I called that broker on my statement and asked him what my options were, making sure to emphatically state that I wanted to take zero risk. He sympathized with me and told me what I already knew: if I wanted my money to be 100% safe then I would have to accept almost zero in return. That’s just the way it was back then and now. Treasury bills and anything insured my FDIC pay almost nothing in interest.

HOWEVER, he said, he would do a little research and give me a call back the next day. During the time I waited for him to call back, I came to terms with knowing that I would have to get almost no return for my money and I was okay with it. My mind was made up that getting very little interest was better than risking losing that particular chunk of money.

But when he called me the next day, suddenly I was a different person! He had several funds that were very safe and had performed admirably in the past. They had very little risk and they should give me a return much higher than I could get with T Bills or anything else. Did I want to consider those?

No, no I didn’t I said.

Well, he said, you really should consider them because they are a good alternative and they really do have a good track record.

What where they again? Funds? Which ones?

Once I started asking for more information I slowly, with his help, started talking myself into buying into one of those funds that just minutes ago I would never have considered. After about another 5 minutes on the phone I was giving him the okay to make the purchase for me.

I had let myself be talked into buying into a front loaded fund that I really wanted no part of and the second I hung up the phone I regretted it. But, being proud, I didn’t call back and now 16 months later I am down about 8% with that money that I wanted to invest with zero risk. This is the chart for the fund I bought into from about the time I made the purchase:

The lesson here is that only I can really know what is best for me and my investments. As I was talking to that broker, knowing full well that he wanted to make the sale so that he could get his commission, I KNEW I was making a mistake. I just knew it and yet I did it anyway. So dumb!

Stock brokers, financial planners, and anyone else who gives you advice about money will not necessarily have your best interests at heart. Yes, there may be exceptions, but day in and day out the only one you know you can trust is yourself. Learn has much as you can about the stock market, gold, silver, funds, bonds, and all the other ways you can invest your money. Doing so will help you make money decisions on your own that are in your best interests.

The reason for that big number is of course inflation because in the next 40 to 50 years, we will probably be seeing a lot of it. The the government is in such tremendous debt that it will undoubtedly continue to print money at an alarming pace and that will lead to inflation.

It is going to be very hard for this generation to retire (maybe at all) as there is no such thing as pensions anymore. When my father retired he got a 15 year pension of guaranteed money. But hardly any companies do that these days and pensions have been replaced with 401K’s. Employers usually don’t pay very much into 401K’s and it is up to the employees to make sure they contribute the maximum throughout their working lives or they will be losing out. Unfortunately, young workers are less apt to understand the need to fund their 401K’s all the way through and this will hurt them when they get older.

Another thing that may delay retirement is the age at which you can become eligible to receive Social Security keeps going up. If it is still around in 40 years (and it may not be) who knows what age you will have to be to get it? 80? 85?

Also hurting anyone who wants to save and invest are interest rates which are pretty much equal to zero. I looked at one of my bank CD’s the other day that is about to mature and realized the interest rate I am getting is .3 of a percent. That is .003 which in my book is the same as nothing. How can anyone accumulate money at that rate? How can kids who are in their 20′s and 30′s today ever get enough saved where they can retire and not have to work?

In other words, there are some BIG challenges ahead of all “youngsters” today who have a goal of someday retiring at a decent age. For many of them, they may find no other option than to keep working through their 60′s and into their 70′s. It is very sad that this is what they face.

In light of this, investing early and often becomes much more important to this generation and unfortunately, the only place they might be able to get a decent return is in the stock market. I say “unfortunately” because there is no doubt that when you buy stocks, you incur risk. Should younger people have all their savings in the stock market just because that is the only place where they might be able to get any kind of return?

When I was in my 20′s and 30′s I did have most of my money in stocks but I was comfortable with the risk. I am less risk averse (or was) than many and I was able to sleep at well at night and not worry. But not everyone has the mindset to be able to put all their savings in stocks knowing that they could lose some or all of it. Many people would rather put their money in safe, interest bearing vehicles and sleep well at night. But right now those “interest bearing” vehicles aren’t bearing any interest so what does a person do who wants options?

Unfortunately I really don’t have any answers other than to say that it is more important than ever to learn about the stock market and to get involved buying stocks. Nothing is guaranteed but over a 20 to 40 year time horizon, the chances of making money with a solid stock buying strategy are still great. Kids today need to buckle down and sacrifice as much of their disposable income as they can and put it into stocks and maybe some into gold. They need to learn about how to save and preserve what money they have and become as financially educated as possible. Their retirement may depend on it.

When you go onto most any stock site online, you get a quick summary for the stock symbol you put in that looks something like the one below. Information included here are the basics such as what price the stock traded at last, the previous day’s closing price, what price the stock opened at that day, the bid and ask prices, the days range and 52 week range, the volume of shares traded, the market capitalization, the P/E ratio, earnings per share, and the dividend amount and yield. You can see most of those in the stock summary of Apple below:

For a beginner, that’s a lot of numbers and data to digest and it is best to learn what each one means one at a time. Additionally, some of those numbers are more important than others so that is something to take into consideration. For instance, in my over 25 years of buying and selling stocks, it is likely that I have never paid attention to the bid and ask prices. They just aren’t important in my opinion and I have never bothered with them.

The bid price is what someone is willing to pay for the stock at any one moment. The ask price is what a seller wants for that stock. There are of course thousands of these (or more) at any one time and so the numbers you see on your screen like the $389.70 and $389.98 are just indications that you can use to get a feeling for what people are asking and bidding. The x200 and x100 you see in the bid and ask example above means that the bidder wants to buy 200 shares and the seller wants to sell 100 shares.

The difference between the bid and ask numbers you see on the screen is called the spread and usually during the trading day the spread is quite small. When the markets are closed the spreads may become bigger and then narrow down again when the market is open.

For me or anyone who buys stocks for the long haul, a quarter of a point or whatever the difference of the bid and ask prices are just isn’t information that I care about. I either want the stock at the price it is going for or I don’t and I’m not going to worry about that small a difference. I buy stocks with the belief (and hope) that they will go up much more than those small spread amounts. I want the stocks I buy to go up 10%, 20%, 50% or more so the bid and ask price isn’t something that I have ever given much consideration to.

Another reason I don’t pay much attention to the bid and ask prices is because what you see on the screen at any one moment may be delayed and even if it isn’t, it will change by the time you get your order in anyway. Most trading on both the New York Stock Exchange and the NASDAQ is done by computer now and so those numbers aren’t really real time.

Ultimately, it is important to know what bid and ask means when it comes to stocks because it is a supply and demand concept that drives the market. However, whether you need to pay any real attention to the buy and sell prices every time you are about to buy or sell a stock is something I don’t think you need to do, especially if you are investing with a long time horizon.

But I am not “young” anymore (defined as in your 20′s or 30′s) and probably out of touch with what that age group is thinking. Society has changed a lot in the last couple of decades and being that age today means living in a different world than the one I grew up in.

Yesterday I found this article that says that young people today are less likely to buy stocks and more likely to put their money in gold. Actually it makes sense, especially if you look at the chart below of the Dow from 1999 to 2011:

As you can see, the stock market has hardly gone anywhere in the last 12 years. There has been a lot of movement for sure but progress going up and staying there, not much. So just looking at this chart makes me start to understand why young people in their 20′s and 30′s might not be interested in learning how to buy stocks and that they are a solid investment option. They haven’t seen any evidence of it themselves and instead have seen only volatility.

Instead of stocks, gold is the choice for many younger investors today and taking a look at the 10 year gold chart (from Goldmoney.com) it is easy to see why:

That chart is nothing like the Dow stock chart and shows an almost uninterrupted path upwards. Add to that the fact that gold has always been seen as a hedge against chaotic times and you have another reason why gold is so popular now.

We also have Occupy Wall Street going on right now and that movement is largely driven by youth. These are the “kids” that don’t trust our system, our politicians, or our companies. It is highly unlikely that anyone in that group would be caught dead buying stocks.

So what does that mean for the future of the stock market which has been a central part of investing for so long? I wish I knew and I must admit that I don’t like change. I don’t like people not trusting our financial system. I don’t like people changing their investment habits and choices. I don’t like the prospect of the stock market losing popularity because that is where I want to continue to invest with my discretionary income.

But in order to survive in life you have to be willing to change and adapt. Perhaps this will all blow over and the market will take off to new heights again soon. Or maybe I just need to join the young crowd and go out and by some gold coins.