Stocks and bonds have been a great long-term investment option. It is ownership of the businesses that propel the world forward. The world’s economy grows so does the number of companies and underlying stocks. Financial markets no longer are controlled by just a handful of powerful exchanges such as the New York Stock Exchange or Deutsche Boerse (German), they are affected by an intricate and interconnected web that includes financial pick-up sticks. There are many ways to invest in these global pieces of corporate ownership. But for now, we will save the risky and sexy trading of shares that involve derivatives, foreign currency, or day-trading of other columns.
Lusha, The Investment Guru
It is easy to invest in stocks or bonds. It’s easy enough to make fortunes with men with PHDs and MBAs. They are financial network TV celebrities and have written volumes on trends, charts, flash indicators, stochastics, investment psychology, and rally’s that were based on the Dallas Cowboys winning or losing. All of them are experts, and each one has a different opinion. Literally thousands of opinions. Lusha, a famous Russian chimpanzee, defecates at a list on a chart. These stocks have been known to outperform the picks made by some of the best analysts around the world. What does this mean? It’s not easy to buy low and sell high. Better yet, we have the option to either pay big fees to analysts or to hire a primate for a lower price to stock picker.
Common Sense and Indicators
Knowing a little bit about indicators is a good place to start in buying mutual funds, stocks, and bonds. These tools provide an analysis of a company’s relative stock price. The most popular is the P/E Ratio, which compares the stock price to earnings per share. This makes perfect sense. This is a simple calculation that simply divides the stock price by earnings per share. It can be found in many financial publications. A stock with a high P/E might be overvalued, while a stock with a low ratio could indicate that it is undervalued. However, this indicator is only one and can be easily manipulated. One example: During the dot-com boom, there were companies that had zero earnings. This would be a zero P/E ratio… nothing… but these stocks went on to sell like hot cakes at ridiculously high prices. This brings us to the most important indicator that you can use. It is located between your ears, in the analyst measuring six inches wide.
Warren Buffet stated, “Invest in what your know.” Perhaps you agree with the fact that the post-WWII boomer generation is aging. What does this mean? This could indicate that businesses that cater to the elderly will prosper in the future. The F.N. might be a startup you might consider investing in. Walkers Inc. (fictitious), has created a small titanium walking device that includes an espresso maker. Back-orders are soaring at the company. Or you might consider Government Bonds. These bonds are the best investments and they tend to perform well during times of turmoil. Why? Why? Because investors are more likely to seek security than gophers on a course of golf. Investment dollars flow like rivers to safe places and prices rise when there are missiles being fired around the world. For bonds, forget stochastic oscillators or 10-year moving averages. Just pray for instability!
After all, you don’t really need a defecating Chimpanzee or an investment guide.
Diversification through Putting Your Eggs In a Big Basket
You can also buy bonds and stocks in another way. Mutual funds are the best way to buy stocks and bonds. A mutual fund simply refers to a managed collection or stocks, bonds or commodities that is held in one large basket and managed by smart guys. Mutual Funds can be grouped into many different packages, such as those based on Dow Industrial Stocks, growth companies, corporate and government bonds, pharmaceuticals, and emerging markets like Brazil or China. It is believed that owning just a few stocks can be safer than owning many. The best thing about mutual funds is their liquidity. This means that you can quickly exit your position. Mutual Fund performance is largely dependent on the expertise and management of the fund manager. In many cases, you can closely monitor the results with a moving average of 1 year to 5 years, 10 years, or 20 year.
This Author’s Pet Peeve Requires Anger Management Counseling
Always, Always and Always be attentive to the stockbrokers advice as well as advice from experts. The Dow Industrial Average reached an all-time high of $14164 on October 9, 2007. It then began to fall like a base jumper without a parachute, and eventually fell to $7062 on February 27, 2009. We were told by investment Gurus to keep it… that the market would rebound. Poppycock, Fubar!!! It’s better to sell the stock as soon as you can to exit than to jump in again when the stock is a mess on the floor.
You would be much better off if you exited the stock before the market started selling off, and then return to the stock after the dust settles. In fact, even though the market is currently at 12,000, it would still be 15% below the peak of $14164. This is what brokers are supposed to do.
Anyway, I get sick on fast rollercoasters.
