This is a continuation post for what to do with your money - in particular, for how to invest in securities.

I've talked a bit in previous posts about how my previous career (trading) is very similar to my current career (poker).  Another way the two are very similar is the presence of large numbers of fish, many of whom are addicted to the "gamble."  There are plenty of fish (in both arenas) who don't realize that they are actually fish (don't know what they are doing, poor money management, etc).  The fact of the matter is, only 5% or so of the poker playing population are solid winners, and just as few are going to solidly outperform the markets.  And with that, I will segue into my tips for investing in securities:

BE HONEST WITH YOURSELF - regularly look in the mirror and ask yourself if you are indeed a financial fish.  Think about it - by definition, less than half of people in the markets are going to outperform their respective benchmark - yet almost 100% of investors think they are +ev in the markets.  Does this make sense to you?  And on top of it, you have to pay the "rake" - brokerage fees, opportunity cost of the time you spend, etc.  Everyone likes to think they know what they are doing, but very few actually do - even the "professionals."  That's why they are fish.

RESEARCH - This is pretty self explanatory, but you should be able to express in a few sentences why you think a particular investment will outperform the "current market expectations."  Don't be a level 1 thinker and just base your opinion on "P/E ratios," "technicals," etc.  That's already built into the price of the security - you need to think a little deeper.  It's really irrelevant if you think the ipad will do well - you need to have reasons why you think it will do better than what is already priced into Apple stock.

DIVERSIFY - Most well-managed portfolios invest only a small percentage of their bankroll on ONE security.  The fact of the matter is, you never know when some freak occurrence is going to happen: Steve Jobs dying, Toyota recalling cars, Buffet deciding he wants to retire, etc.  So you should try not to keep all your eggs in one basket.

To be continued...