Sometimes I love earnings season and then sometimes I hate it! If you’re wondering why… see Google’s 30 point nose dive in the after hours market today.

[click image to enlarge chart]

For disclosure purposes, I should say that I did not own Google prior to their earnings announcement but I think their after hours belly flop presents a great learning opportunity.

1. Illuminates the dangers of holding individual stocks. If you lumped all your eggs into the GOOG basket earlier this week, then congrats, you just lost 5% of your investment in less than 5 minutes. If you’re not up for this sort of risk, then you might want to consider index funds or ETFs that own a collection of stocks to dilute your risk.
2. You should always know when your stocks are reporting earnings. If you own individual stocks, you should know when they report earnings well in advance. If you have a Google Calendar account (which you likely will if you use Gmail), simply go to Google Finance, have your stock’s “Events calendar” imported into Google Calendar, and they will update one another automatically with no work on your part. Use automation to your advantage and you won’t get caught napping.
3. Be patient and pick your battles. Instead of chasing the market for opportunities, let the market give you buy on the dips opportunities. Let the buyers and the short sellers battle it out everyday while you sit on the sidelines. Once you see a clear winner, join the team that’s winning. I’d rather be a live mercenary than a dead hero any day!

Remember, earnings season comes four times a year, so if you take a hit like this, try to learn from your mistakes or reduce your risk profiles as you deem necessary.

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