Picking Stocks Like an Owner

I have found and investigated over 1,600 investment strategies.There are many an average investor can use, in which he or she can imagine buying a personal business.

An investor can take the same attitude as any owner would. The strategy can revolve around what an owner wants a company to accomplish. Everyday business worth never enters an owners’ consideration, just making a decent profit while the business is on a growth path.

As for the rest of the stock-pickers in the market who think otherwise: They’re the short-term, quick-buyers and sellers. Most are trading company names. They really have no clue about what the business is, that they are buying and selling. Most of the financial reports they see are little more than hearsay and gossip from Wall Street pundits looking over each others’ shoulders.

There are lots of strategies to choose from. Know them thoroughly before you invest. ( See the Earl J. Weinreb NewsHole® comments.

Seeking Securities Diversification

Studies show approximately how many securities issues need to be in a portfolio for practical diversification. The futility of the attempt becomes evident when you realize that this pursuit is actually a vague effort for most investors.

Diversification to overcome risk varies by investor needs and characteristics. It has relatively little to do with the number of securities in a portfolio, whether there are thirty or 100 or more invested.

Moreover, investors also tend to seek diversification by purchasing several mutual funds. However, in doing so, they may be duplicating a good amount of their portfolios. ( See the Earl J. Weinreb NewsHole® comments.

The Risk of Managed Funds

Investors should consider mutual fund manager risk. They do this when choosing an investment portfolio that's fully and actively managed.

To choose managers, they must rely on past performance which is not reliable, as evidenced by independent research.

Furthermore, many funds use a staff or committee system of a managers, not a single individual. Also, mangers come and go, in a game of musical chairs. ( See the Earl J. Weinreb NewsHole® comments.

Corporate Bonds and Inflation

Keep worrying about corporate bonds you own and the specter of inflation? What will happen to the value of the bonds when interest rates go up?

You get that protection in the form of diversified, low-cost bond funds with shorter duration, that reinvest their income.

I constantly refer to duration, which the financial media unfortunately and ignorantly tends to overlook.

The duration should match the period you intend to hold the bond funds. ( See the Earl J. Weinreb NewsHole® comments.

Picking Stock Winners

It is harder to pick stock winners than you may think from perusing the financial media. Yes, everyone believes they can, but after all the effort, how many successful picks can you really find?

You hear about big stock winners but how many securities lottery winners are available? How many are recognizable early on? It’s always easy to find those who did well-- after the fact.

Furthermore, when you look at these relatively small numbers of winners, you find that they had their periods of struggle. The profit numbers look excellent only after years of market ups and downs. How many investors had the stomach to buy those stocks at their lows and to hold on to them to their highs?

None of the successful securities had gone up in a straight line. Most hit bad cycles when most of the original holders deserted ship and sold.

Market psychology is always a serious factor that dictates the lack of discipline required of investors. Most take what profits they see on the way up, and run. So the odds of achieving huge winnings are even steeper.

401 (k) Post-Job Conversions

What do you do with your 401(k) when you change jobs? When you change jobs you have several options with your 401 (k) retirement plan:

You can roll your money over into your new employer’s plan, if they allow you that privilege.

You can keep money in your old employer’s plan, if permitted.

You can roll your money into traditional IRA plans.

Check your other options, especially because some may apply more specifically to your financial and family situation. Those regulations change from time to time.

Using Wall Street Wisely

I always have made this distinction about Wall Street: It’s simultaneously an investment community and a constant-trading medium. Both are essential.

But trading aspects can go to extremes. When extreme actions occur, there can be potential danger. It is thus essential that the average public understand how Wall Street operates.

I have found from experience that the average investor does well by avoiding trading extremes. That’s possible by sticking to a disciplined, favorite strategy and then forgetting daily market prices. You don’t need constant financial news, unless your investment strategy calls for it. Relatively few strategies do.

Short-term, in-and-out, frenzied trading by the pros is their game, not yours. (See the Earl J. Weinreb NewsHole® comments.)