Dangerous Investments

In the early 1980s, when I was in my early 20s, I knew very little about stocks. A guy called me, saying he was a vice president at a well-known investment company and he had an opportunity for me — a great stock that would make me a lot of money. That was the first stock I ever bought. Two months later, I called the investment company and found out that the company I’d invested in had declared bankruptcy; I had lost all my money, and the guy who had called me no longer worked for them. I did not know anything close to what I know now.

Now I can do some fundamental and technical analysis of stocks. These days I read charts and pay little attention to fundamental data, as I am working on day-trading for a living — R.R., Richmond, New Hampshire

The Fool Responds: Beware of any cold calls from brokers pushing stocks and other investments. Great opportunities are not peddled that way. And think twice before day-trading, too, as it’s very risky. One study found that 80 percent of active traders lost money and only 1 percent of them could be described as predictably profitable.

We favor long-term investing and fundamental stock analysis, studying companies’ revenue, earnings, profit margins, debt and cash levels, competitive advantages and so on, instead of trying to draw meaning from charts of stock-price movements.