Making money in the market isn't always hard. Last summer, when stock indexes surged into record high ground, well over half the 30 Dow Jones Industrials reached historic individual highs as well. Thus everyone who bought stock anywhere along the line could have ended up the wealthier for it.
In the long run, though, prices are wont to fall as well as rise, and buying and selling stocks isn't so simple. Too bad the annual crop of investment guides doesn't provide more help. Take this statistically refutable caveat from 1986's oxymoronic Riches Without Risk. "Selling short is equivalent to rolling dice," misspeaks author Gene Mackevich (a vice-president of E. F. Hutton, no less). On the contrary, selling short is not only a conservative defense against capital erosion but a perfectly acceptable money-making tactic in its own right. For example, you could have bought McDonald's Corp. for $50 a share in October 1979 and sold it in January 1981 at $52, eking out a 4% gain. But suppose within the same 12 months you sold it short instead, covered at subsequent bottoms and went long, and shorted again at subsequent tops. By staying on the right side of the market at the right time, you would have nearly tripled the same investment!
Even more destructive to financial planning are the ranks of evangelistic fearmongers preying on the public's natural paranoia. "On the one side are the typical small investors -- naive, unknowing, and anxious to believe. On the other are the manipulators, the white-collar thieves, the all-powerful Institutions. . . ." Such is the latest jaded view of Wall Street, this one from Herbert Ringold, in How to Lose Money in the Stock Market. You'd never know it from these $16.95 prophets, but the days of sustained insider manipulations are long since past. As anywhere in commerce, illegitimate activity still goes on, but, thanks largely to the Securities and Exchange Commission and internal watchdogging of the exchanges, much of it is soon uncovered.
A beginner will be better served by such atmosphere-setting classics as John Brooks's The Go-Go Years and Adam Smith's The Money Game. But if you already know what you're doing, perhaps the best advice is simply to avoid investment guides.More usable stock-market information and analysis comes hot and heavy over television -- not only in the earnest reflections of PBS's "Wall Street Week," but throughout the day, while stocks are ticking, from business services such as the Financial News Network. No text can tell you why the Dow just leaped 12 points in the last hour.