Why Most Investors Will Never Make Money in the Stock Market… And How NOT to be One of Them

I want to change how you think about the stock market. Let me explain…

In the course of a month, we receive an enormous amount of emails from subscribers. And we read every single one of them.

#-ad_banner-#There is simply no better way to know how investors are feeling than by reading the emails you send in.

As you’d expect, when the market tanks and people get nervous, I get a lot more email than when the market is rising. When the market goes up, people don’t worry about their stocks. They go to dinner. They go on vacation. They enjoy their lives.

But when the market falls, they believe they are about to lose all their money. People worry. They lose sleep. They just want to sell so that they don’t have to worry anymore. It’s been that way forever. For most people, it will always be that way.

But I want to change the way you think about the market. Sadly, based on experience, I can say confidently that most of you will not follow my advice. But I’m convinced that those who do will be better — and wealthier — investors because of it.

So why am I telling you this right now?

It’s all because of a single email a reader sent me about my Top 10 Stocks advisory just days ago.

For privacy, I won’t publish this subscriber’s name. But here’s what he wrote me in the middle of a market sell-off where the Top 10 Stocks portfolio continues to beat the S&P:

“The report should give an overview of performance, and suggested stop loss levels on the recommended securities.

“Frankly, the performance of late does not inspire.”

Now, I don’t personally know this subscriber. I don’t know which securities he owns in his portfolio, and I don’t know his investing track record. But I’d be willing to bet that more often than not, this investor loses money in the market.

How do I know that? Because he is focused too heavily on short-term swings.

The instant a stock falls, investors want to know whether they should sell. It doesn’t matter if the underlying company is performing well or not — the fear of losing money is simply too much for most small investors to stomach.

I’m convinced this is why most investors lose money in the market.

Investors driven by fear and short-term market moves are the ones who sell when the market falls… and buy when the market is rising. This is a perfect recipe to lose money and ensure that they’ll never see the greatest profits.

Don’t believe me? Consider this example…

Everyone knows Apple (Nasdaq: AAPL). During the past decade, Apple has been one of the market’s best investments. Since 2003, the stock has returned more than 7,500%. It has made many investors millionaires. But this doesn’t mean the shares always went up.

Take the 2008/09 bear market. Apple’s stock dropped more than 50% — falling even more than the S&P:

Countless investors dumped the stock… most after it had already dropped sharply. Then they refused to have anything to do with it on the way back up. So not only did they suffer a loss on the shares when they sold, but they also missed out on Apple’s sensational multi-year rise:

I’m telling you this now, because volatile markets are simply something investors will have to deal with for the foreseeable future. There will be times of calm, and I believe over the long term the market will move higher. But thanks to serious debt problems in the developed world and tepid growth worldwide, the market will continue to swing, sometimes wildly.

Although I’d love to see a steadily rising market, these sell-offs are opportunities to pick up shares of great stocks at bargain prices you wouldn’t see otherwise.

That’s how I want you to view the market.

But if you looked back at the past century, then you’d see there hasn’t been a single sell-off that didn’t later turn out to be a terrific opportunity to buy stocks, assuming you bought solid companies at attractive prices and had the resolve to hold them for the long term.

This includes The Great Depression… the sell-off in 1937… the sell-off between 1973-74… the 1987 crash… the “Dot-com” crash… and the most recent sell-off during the recession.

Action to Take — > All of these times turned out to be wonderful opportunities to buy. I understand why many investors get nervous. But the most successful investors use these periods to generate enormous profits.

If you’re looking for stocks that are good buys regardless of what the market is doing, then don’t miss the latest presentation on my “Top 10 Stocks for 2012.” One stock has raised its dividend 110% in five years… another has $8.25 per share in cash (45% of its share price)… and another yields 8.0% while it has nearly doubled its net income year-over-year. These are the types of investments that make up my “Top 10 Stocks for 2012″ report.