Stocks
- Thread starter moo321
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You should own companies in different industries, that trade apart from each other. Intel, Google, Microsoft, and Dell is not diversified, even though they all do different things. Ford, Intel, Merck, Wal Mart, and JP Morgan Chase is diversified.
You should also learn to understand what is called "market rotations". Some stocks do well in certain market environments, and their earnings (and stock price) are cyclical.
For example, Maytag does well when the economy is doing well, and people are buying higher cost items. Similar with Ford, GM, etc. On the other hand, gold does well when everything is tanking, and Proctor & Gamble does well at the very bottom, because no one will ever stop buying toothpaste and shampoo, and P&G will be making earnings when everyone else is missing.
If you can decide which sectors will be hot, AHEAD OF TIME, you can shift funds into them. This is often a function of the Fed rate. Now, you can't throw everything into one sector at once, so your portfolio should be selling what is about to tank, and buying what is about to go up, and holding everything in between.
Price to earnings is important, but in order to trade properly, we must figure out if a company will actually make those earnings. The only way to do this is to understand rotations.
Our economy does NOT grow in a steady line. It lurches forward, and has smaller retreats: http://www.statistics.gov.uk/cci/nugget.asp?id=192 (Archive copy). GDP has massive swings, and the key to well above average returns is trying to time these.
You should also learn to understand what is called "market rotations". Some stocks do well in certain market environments, and their earnings (and stock price) are cyclical.
For example, Maytag does well when the economy is doing well, and people are buying higher cost items. Similar with Ford, GM, etc. On the other hand, gold does well when everything is tanking, and Proctor & Gamble does well at the very bottom, because no one will ever stop buying toothpaste and shampoo, and P&G will be making earnings when everyone else is missing.
If you can decide which sectors will be hot, AHEAD OF TIME, you can shift funds into them. This is often a function of the Fed rate. Now, you can't throw everything into one sector at once, so your portfolio should be selling what is about to tank, and buying what is about to go up, and holding everything in between.
Price to earnings is important, but in order to trade properly, we must figure out if a company will actually make those earnings. The only way to do this is to understand rotations.
Our economy does NOT grow in a steady line. It lurches forward, and has smaller retreats: http://www.statistics.gov.uk/cci/nugget.asp?id=192 (Archive copy). GDP has massive swings, and the key to well above average returns is trying to time these.
Be careful with generalizations like that, because PG is not recession-proof. It is a name-brand company that does not make private label products like those that Wal Mart and Target sell as "off-brands". Sure, people still buy toothpaste and shampoo, but not always the name brands when the economy is rough.
(By the way, I do have a very solid position in PG. But it's not because it does well in the tough times. I own it because it is a great company that has increased dividends annually for decades.) :joker:
good luck
(By the way, I do have a very solid position in PG. But it's not because it does well in the tough times. I own it because it is a great company that has increased dividends annually for decades.) :joker:
good luck
I would also have a solid 20% in Gold. Personally, my pf is up to 1/3 after the June turnover. Much of that is a long-term (2005 based) holding based on 20%.
I do agree with the Chef on this one for exactly the reason listed... generics. Buy a box of K brand cereal for $3+ or buy 2 store-brand boxes for $3.50. Guess which one gets popular in a deteriorating economy?
I do agree with the Chef on this one for exactly the reason listed... generics. Buy a box of K brand cereal for $3+ or buy 2 store-brand boxes for $3.50. Guess which one gets popular in a deteriorating economy?
The thing about timing market rotations is you may not even prevent yourself from losing money in a bear market. BUT, it allows you to lose less in bears, and then be in the stocks that catch on fire in bull markets BEFORE they get hot.
You'll still face bulls and bears anytime you're buying stocks (as opposed to shorting) but you lose less in the bears, and make much more in the bulls. Another thing to consider is that when you see a recession coming (because of Fed rate hikes, etc) you can pull money out of the stock market, and get it into cash and bonds, which are usually paying more because of the higher discount rate.
You'll still face bulls and bears anytime you're buying stocks (as opposed to shorting) but you lose less in the bears, and make much more in the bulls. Another thing to consider is that when you see a recession coming (because of Fed rate hikes, etc) you can pull money out of the stock market, and get it into cash and bonds, which are usually paying more because of the higher discount rate.
Not true. The dividend is priced into the stock. I worked as a prop trader for a while holding some positions for seconds trying to scalp a penny here and there. It's exciting but few people can actually make money at it (kinda like bj). Trading and investing are very different animals. You can trade anything and make money if something gives you an edge...but once others find out you have to adjust, psychology is key. Investing you've got to look for value and have huge time horizons...or just invest in what Buffet says to invest in and you'll have and edge eventually (coke is still cheap so the oracle fortells). For trading literature read up on the Turtles, technical indicators, and for BJ enthusiasts if you can borrow Thorp's book it might be entertaining though I've never read it. If you just want to invest money go with indexes, long bonds, and probably some hedge on the US dollar like a Euro and Yen ETF.
For the long term Shadroch's posts are right on, dollar cost averaging and buying exchange traded funds, what others have been referring to as index funds. Unlike mutuals there is no or little fee, other than what it costs to trade the stock with your brokerage firm.
The 3 I have are:
SPY - tracks S&P500
DIA - tracks the Dow Jones Industrials
QQQQ - tracks the tech heavy NASDAQ
these three track the 3 most widely followed indexes. Big companies. If you own these you own MSFT, AAPL, Google, JNJ, IBM, etc... etc...
in addition to these, i have bought into some 'junk' banking stocks lately, knowing that in 10 years, my picks will have recovered. Also I hold some AAPL, TTWO (bought before GTA IV was released and doubled it's value), and hmmm what else.... mostly in in the index funds so i don't have to think about them since they are all in a ROTH.
The 3 I have are:
SPY - tracks S&P500
DIA - tracks the Dow Jones Industrials
QQQQ - tracks the tech heavy NASDAQ
these three track the 3 most widely followed indexes. Big companies. If you own these you own MSFT, AAPL, Google, JNJ, IBM, etc... etc...
in addition to these, i have bought into some 'junk' banking stocks lately, knowing that in 10 years, my picks will have recovered. Also I hold some AAPL, TTWO (bought before GTA IV was released and doubled it's value), and hmmm what else.... mostly in in the index funds so i don't have to think about them since they are all in a ROTH.