Secrets to Mastering the Stock Market

I’ve met thousands of investors from all walks of life in the many years I’ve been doing what I do. With a PhD in Finance I’ve seen what the academic community is up to. Having run a hedge fund, I know how the institutional investors think. And having spoken with and written to countless individual investors for many years, I know how they think, as well.
And Brian is more insightful than just about all of them.

The crazy part? Brian is only 25 years old. But he’s the real deal what is often referred to as a true “natural.”

I met Brian Hunt after making my presentation at a recent investment seminar. He so impressed me that I hired him on the SPOT. I wasn’t even sure what he was going to do just that I had to bring him onboard. I sensed the guy was that good.
Well, my instincts turned out to be right. And now he’s part of our team (http://www.pirateinvestor.com/).

And I couldn’t be more pleased because Brian Hunt can improve your investment skills.
Let’s put him on the hot seat and figure out how he got so good so fast and how you can apply his secrets to improve your own stock market success.

Steve: How old were you when you first realized you had an interest in the stock market?
Brian: In 1998 at age 20 I’d saved up $16,000 and I figured I needed to do something with it. So I ended up buying some mutual funds.

How did you go from there to buying stocks on your own?

Well the big boom was underway, and I thought that I was smart enough to beat the manager of my mutual fund. So I pulled it out and sent it to E-Trade.

What was your first buy?

Cisco was my first buy. But Uniphase, soon after that, was how I got hooked. I put $600 into Uniphase and probably within a year that investment was up to $5,000. I started thinking if I had put $6,000 into Uniphase, then I’d have $50,000.

Did you have any trading background? Was anyone in your family or anyone you knew involved in the stock market?

No I grew up on a farm in Iowa. Dad was a farmer, and Mom helped out on the farm and raising the kids. Neither of them had college educations, though mom is now a nurse.

My Mom probably would have done pretty well in the market if she had an interest in it. When we were farming a lot, my Dad gave my Mom 1,000 bushels of our corn to sell futures on when she was pregnant with me. She charted corn not knowing anything about technical analysis or charting or futures markets. And she did well, getting a good price for our corn.

She knew about how I was doing in the stock market. And probably in December of 1999, she warned me about my trading, saying, “It [the stock market] sure seems like it’s run up too far too fast.” This was from someone that hadn’t bought a stock in her life. I thought, “What does she know?” It turns out that Mom knows the way people think pretty well.

Uniphase then went from $5,000 to probably $500 when I sold, turning an enormous profit into a loss. I say “probably $500″ because I’d also bought more I made the mistake of averaging down - buying more of a position I owned - and I probably lost 90% on that.
How did you decide to buy uniphase in the first place?

Honestly, I read about it in Money magazine and it sounded good.

What homework had you done when you were just getting started?

I had the idea that I’d learn how the most successful investors created millions in the market, and I’d imitate it. So I read Peter Lynch and Warren Buffett books. The funny thing is, these guys are “value” guys - they’d never have bought Uniphase. I had the right foundation, probably, but greed completely clouded my thinking.
Was it uniphase that affected you the most?

No. I had gotten very successful or so I thought. Then I put $40,000 into LSI Logic based on a newsletter recommendation. The $40,000 ended up worth $17,000 when I got out. That really affected me. For someone who grew up with no money, losing that much I just thought to myself, “How could I have screwed up so bad?” I’m a person who doesn’t like to spend $23,000 on a car, but here I was virtually throwing money away on the market.
Did you keep adding to the account?

No.

After that, I finally figured out I had no idea what I was doing, and I sat on it for a year hoping that it would go back up. I spent time learning. I had been reading books this whole time about the basics, so I knew this stuff, I just wasn’t practicing it. I finally decided to practice cutting losses. I sold everything. Then I could think with a clear head.

Looking back, what were some of the biggest mistakes you made?

Trading without doing my homework Listening to hot tips, both from friends and from newsletters and basically not having a plan or knowing what I was doing
You’ve talked to a lot of traders and investors at seminars. What do you see as the primary mistakes most investors make?

Not doing their homework to understand the basics of stock picking and investing the same problem I had. A lot of people have stories of taking huge losses, but they still don’t cut their losses. They don’t try to learn from their mistakes.

What are some things people could change right now to perform better in the stock market?
Stop listening to CNBC, stop reading message board posts, and spend time on the big picture - not the day-to-day stuff.

Read books from people that have actually made money, like Market Wizards. For me, William O’Neil’s book How to Make Money in Stocks was a good start, because it covers fundamental analysis and technical analysis, and it was the first place that I read about selling a position when it goes against you.

Also, try and learn from every trade. Write down why you’re getting in and what will cause you to sell up front. And write down why you sold when you sell. Then you’ll be able to see your mistakes.

Investing is like anything the only way to improve is to work at it and learn as much as you can.

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