If you’re trying to follow the bear and bull markets in coming up with an investment strategy, Ed Stern of Piper Jaffray has a word of advice: There are two different barnyard animals that will be much more helpful, chicken and pigs.

“It’s important to bring perspective into the market…People tend to be motivated by fear and greed, it can overtake them and cloud their objective judgment,” said Stern, the hands down winner of the Kitsap Peninsula Business Journal’s Stock Watch competition two years ago.

That means love is not a sentiment to be used in investing — investing in a company you love or selling stock because you hate it is the worst kind of thinking.
  One question investors should ask is what is there upper and lower limit when holding or selling the stock, then using discipline. Trading on momentum, however, can be a big mistake — Stern says it’s the fundamentals like understanding the company that should be considered over momentum.

“Price of stock is secondary,” said Pete Crane with Salomon Smith Barney, who suggests that instead of focusing on price, you should focus on the company’s market, research, regulatory issues and other factors.

One mistake many people make is trade based on news, whether it’s from TV or newspapers. By the time the analysts and other news get their spotlight in the media, however, Wall Street had likely already absorbed the changes and is moving on to the next ones.

“Radio, newspaper and television is best characterized as old information, it has been at least anticipated if not absorbed on Wall Street… and it’s too late to act on it,” Stern said.

Another mistake some people make before investing is waiting until they can educate themselves enough so they can understand how investing works.

“You don’t have to understand what an individual company is doing, it gives people an excuse to never get started,” said Crane. “The idea, particularly for someone getting started, would not be to invest in individual stocks but in mutual funds instead.”

Mutual funds are not only the opportunity to diversify investments but also to hire a fund manager whose sole occupation is to follow and understand the market every day. They are especially attractive because they don’t require as much upfront money as individual stocks — and because individual investing is as Stern describes, “50 percent science, 50 percent art and 50 percent luck.”

“Given all the complexity, the average investor who has little or no time to pay attention or money available immediately to buy outright — the beauty of mutual funds is that it leaves the driving to others, so you satisfy yourself with the vehicle and the driver and then you’re just along for the ride,” Stern said.

The best mutual fund investment tool is the 401K or 401B plan offered by the employer: It’s easy to set up, it gets matching funds so you make money right off the bat, and it can be set up as a payroll deduction that is taken out tax-free. Make sure you have maxed out all the employer has to offer before going beyond that plan.

If mutual fund investing seems too detached, Crane suggests once you have a good mutual fund program, take five percent to 10 percent of the available investment funds and put that in individual stocks. “That’s what’s going to bring it home and make it real…and makes you feel like an investor,” he said, recommending that people choose a company they can relate to, like Starbucks, Microsoft or Costco locally. This gives the investor the chance to follow it, and even if it’s a small portion, feel like a true stockowner.

Stern has another suggestion: “You will never buy at the bottom and sell at the top, so don’t kick yourself, you are in it for the long haul.”.