How Will Common Stocks Perform in the Future?

                       

I find a major disconnect among investors about what they expect to earn from their securities portfolio over the next ten, twenty and more years, after tax and inflation.

                       

Admittedly, that is a tough prediction because investors must take income taxes and inflation into account, along with projected securities’ yields and market returns. That isn’t simple.

                       

In one survey, the net/net/net predicted return by a number of experts over the next fifty years, estimated returns ranged only between 2% and 3% annually. That is unusual and shocking. Investors’ experience from the past would have had expectations to be close to about 6%.

                                           

In fact, many securities markets observers believe that potential, along with taxation and inflation bites, will impair future market returns. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

How a Long-Term Owner Picks Stocks

I have found and investigated over 1,600 investment strategies. There are many an investor can use, in which he can imagine they would be his own business.

                       

The investor can take the same attitude as any owner would. The strategy can revolve around what he wants the company to accomplish. Everyday stock prices and values never enter business consideration while the business is on a growth path.

                       

Short-term, quick-buyers and sellers often are trading company names. They really have no clue about what the business is. Most of the financial reports they see are little more than hearsay and gossip from Wall Street pundits looking over each others’ shoulders.

                       

The clunker stock the short-termer is selling is probably considered a diamond- in-the-rough by the buyer. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Stock Investing Psychology

                       

Market psychology is always a serious factor that dictates the lack of discipline in investors. Most take what profits they see on the way up, and run; no matter what their original strategy or purpose was for buying that security. So the odds of achieving huge winnings are always poor.

                                           

And besides, it is almost impossible for an outside observer to properly evaluate management. Analysts who make it their profession cannot evaluate managers wisely or adeptly from the outside. Why believe the public can?

                       

Therefore I have found the odds of this sweepstakes are too steep in the long run. I suggest investing in low-cost index funds as your best bet. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Some Currency Convertibility into Gold?

 

                       

Even free market monetarists believe some version of a gold standard is necessary to keep politicians honest.

                       

The Federal Reserve System has become a shambles, beholden to free- spending tendencies and more in line with the executive branch of government’s Treasury Dept and its fiscal policies.

                       

The Fed’s role is primarily monetary and the stability of the dollar. It also has been given the job of creating jobs, which ruins its basic function.

                       

There has been some talk of a Gold Commission. Perhaps a form of gold convertibility will come some day. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Federal Reserve Shenanigans

                       

I should  point out that I had spent over 3 years studying the Federal Reserve systems as M.B.A. study evenings at New York University. I have been a life-long observer of this institution which has been known to be quite fallible.

                       

Despite all the loose money policy of the Fed, I find the Fed efforts have failed to stimulate, with all its vaunted expertise. In fact, our money usage today has become less and less effective.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Picking Stocks?

                   

It's tougher to pick stock winners than you may think from reading or listening to the financial media.

                   

Everyone believes they can, but after all the effort, how many do they really find?

                   

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

                   

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

                   

None of the successful securities had gone up in a straight line. They hit bad cycles when most of the original holders lost faith, deserted ship and sold. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Importance of Investment Discipline

                   

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. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)