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Weekend Edition – “No More Bets”

If you've ever played the table games in a casino (roulette for example), you know there is a point at which the dealer will yell out "no more bets."

The business media loves to create these situations on a regular basis with its high-intensity focus on every piece of incoming economic data. The "Brady Bunch"-like camera shot is in place, and then the next live-or-die number is released. The eternal hope for television commentators is that volatility will surge, because that equals higher ratings.

Day-traders have been trying to game these moments since the manic business media stock coverage began decades ago. Personally, I see this stuff as a total waste of time. Instead of providing insight, much of the coverage simply blinds the retail investor from what should be his or her real focus: making money in the markets by investing in great companies.

Forecasting is another "sport" that has taken over the media these days. Pundits are modern-day rock stars, even if their calls are wrong much more often than they're right. I beat the drum on this issue consistently because I've been sickened by it for so long - from my early days as a trader from the mid-90′s, up to the launch of You can call trading what it really is: gambling.

The most recent trend among traders is utilizing social media to aid their investing decisions. Whether it's Twitter, Facebook, message boards (anyone remember how popular the "Raging Bull" or Yahoo Finance chatrooms were?), or another "flavor of the day" platform, the end result usually isn't pretty for those who attempt to make their living by day trading. Unfortunately, outsiders see trading as an easy gig, and if they had a large sum of capital to trade, they'd do it too.

I can tell you from experience, trading is mentally exhausting and requires exorbitant amounts of discipline. Plus, you can be "right" and still lose money if your timing is a bit off. Or, you can nail a bunch of trades in a row, then all of a sudden go into a mini-slump. Even the most disciplined traders are bound for these streaks, since discipline can actually hamper your returns when the markets get particularly frothy.

The admission level of traders in no different than the admissions of a gambler. You'll usually hear plenty about a trader's "wins," but very little when it comes to their "losses." The simple fact remains, most people should not be trading to begin with!

Now I'm not arguing for a "buy and hold forever " strategy. I firmly believe investors should always remain flexible and vigilant against under-performance. I also think investors need to keep a close eye on their portfolio holdings, and have the strength to cut losses when companies lose their way. That doesn't mean having to go into one's account each week to re-balance. Just regularly monitor your holdings and you'll stay ahead of the game.

Pundits will also sometimes recommend buying large indexes like the S&P as a good strategy. After all, you're mirroring the performance of the overall market without having to buy all 500 S&P stocks separately, right? Wrong.

You see, too much diversification can be as big of a problem as under-diversifying. Instead, put together a basket of strong dividend-paying stocks that you can easily keep an eye on. That's the most appealing way for investors to put the power of compound interest to work (and/or generate income).

We believe we have the best plan for most investors here at, especially in this volatile market environment. The idea is to examine names on our "Best Dividend Stocks" List when looking to put fresh money to work (hopefully each and every month - getting into a monthly routine will take you one step closer to building up your retirement nest eggs or other financial wealth-building goals you have). When a name comes off our list, we advise holding off putting any new capital into that particular name.

As for selling, we will rarely issue a "sell" call, but for the most part, we consider the names removed as "Holds." Remember though, if a stock you own falls 25% or more from its 52-week high, you should take a closer look at the name and consider trimming it if the company's fundamentals are deteriorating. An isolated falling stock price is often a hint of trouble ahead for that company, while if the entire market is selling off, you should make sure your portfolio is well-positioned with the best income-producing ideas that are relatively pullback resistant (and likely to bounce back the quickest).

That's investing, folks. It's about being flexible and never taking your eye off the prize of building wealth and financial security.

Thank you for sharing part of your Labor Day weekend with me, and please be sure to pass this post on to anyone you think we can get inspired and educated about money, building wealth, and using common sense to do so.

Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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