Raise the Hammer

Brandon, I still use the reported numbers, under the assumption that most companies are not outright frauds, however, I tend to listen to my gut more than I would have before. I think in most cases, the reported numbers are basically correct, but I think the threat of criminal prosecution could have as much to do with that as monitoring by the S.E.C.

I don't think you can go wrong, however, in doing as much investigative work into the company as you can. Off balance sheet items are a huge red flag in my book, since they are essentially unknown liabilites and therefore limiting your exposure would probably be a good idea.

Furthermore, I like companies that I can understand, since you eventually get a feel for management and where the company is headed. Therefore, when the stock price dips, which it usually does, you have already made yourself an expert on the company's strengths and weaknesses. This is a huge advantage over the market, because they tend to drift from stock to stock based on emotions.

Lastly, try to stay away from the mindset of playing it safe. That's exactly what I did when I purchased the stock that cost me 20K. I thought it was a conservative company to invest in and it turned out to be the complete opposite. I always talk about balance and I think that's part of the reason why this stock blew up on me. Since that time, stocks that I have bought because they were fun and that made products I thought were cool, actually performed the best.

Therefore, in the end, I would tell you to assume that you will lose all of your money, but if you still want to invest anyway, pick companies you can have fun owning. I think the more fun you can have with it, the more good karma you will likely bring to the table and perhaps this will influence the outcome in a positive way. Life is about balance, so in trying to avoid the negative, I think we just attract it even more.