Stocks and Bonds and a Stock Pick Chimp

Stocks and bonds have historically been an excellent long-term investment vehicle. In essence, it means ownership in the companies that propel the world forward. As the world grows, so do the companies and the underlying stocks that are its foundation. Financial markets are no longer dictated by a few powerful exchanges like the New York Stock Exchange and Deutsche Boerse (German), but are affected by a vast and complex and interconnected network of financial recovery sticks. Of course, there are many ways to invest in these global corporate-owned pieces, but for now we’ll save the attractive, if risky, methods of trading stocks involving derivatives, forex, and day trading for other columns.

Lusha, the investment guru

Investing in stocks and bonds is, in principle, very simple: buy low and sell high. In fact, it’s easy enough, men with doctorates and masters in business administration in addition to their names, and television celebrities from financial networks who have written volumes on trends, charts, flash indicators, stochastics, and investment psychology and even rallies based on whether the Dallas Cowboys win or lose. They are all experts and they all have different opinions, literally thousands of opinions. There is also a now famous chimpanzee in Russia named Lusha who throws his defecation at a list of stocks on a chart and those stocks have tended to meet or exceed the picks of some of the most sophisticated analysts in the world. What does this tell us? That buying low and selling high is not that easy or better yet, we can choose to pay analysts large fees or hire a primate at a much lower cost to be our stock picker.

Indicators and common sense

A good place to start when buying stocks, bonds, and mutual funds is to learn a little about the indicators. These are tools that provide an analytical look at a company and its relative stock price. One of the most common is the P / E ratio (price-earnings ratio), which looks at the current price of stocks in relation to their earnings per share. That makes sense! The P / E ratio is simply the stock price divided by the earnings per share (which can be found in any number of financial publications). A high P / E ratio could indicate that a stock is overvalued and a low P / E ratio could imply that a stock is undervalued, but this is just one indicator and is completely unstable. For example, during the dot-com bubble, some companies were not making a profit like a zero P / E … nothing … a big donut … and yet these stocks were sold through the roof at a hyperinflated price level. Which brings us to the most important indicator you can use. It is found in the six-inch-wide analyst that hides between his two ears.

Warren Buffet said “Invest in what you know.” For example, you might agree that there is an aging baby boom population after World War II. What does that mean? It could mean that businesses that sell services or products to seniors will do well for years to come. You could invest in a start-up company called FN Walkers Inc. (fictitious) that has developed a compact titanium walking device with a built-in espresso machine. The company is reporting backorders going through the roof. Or you could consider government bonds. These are generally the safest investments on the planet and tend to do well in times of turmoil. Why? Because investors rush to safety faster than moles on a golf course. When missiles start firing around the world, investment dollars flow like rivers to safe havens, and the price goes up as a result. With bonds, forget about stochastic oscillators and 10-year moving averages and pray for instability and bad news.

After all, you don’t need an expensive investment guide or to defecate chimps.

Diversification by putting your eggs in a large basket

There is another way to buy stocks and bonds. It is through mutual funds. A mutual fund is simply a managed collection of stocks or bonds or commodities that are kept in one big basket and managed by really smart people. Mutual funds come in many packages, like funds based on Dow industrial stocks or growth companies or corporate and government bonds, or pharmaceuticals, or emerging markets, say in China or Brazil. The theory is that owning a small part of a hundred shares is safer than owning a large amount of a single share. Another advantage of owning mutual funds is that they are completely liquid, which means that you can exit your position almost immediately. Mutual fund returns are largely based on the fund manager’s experience and the results can be closely monitored in many cases with a 1-year, 5-year, 10-year, or even 20-year moving average.

This Author’s Pet Requiring Anger Management Counseling

Always, Always, Always, be attentive to the advice of your brokers or the advice offered by so-called experts. On October 9, 2007, the Dow Industrial Average reached an all-time high of $ 14,164. After that, it began in freefall as a base jumper without a parachute and eventually hit a low of $ 7,062 on February 27, 2009. The investment gurus told us to hang on … the market will rebound. Poppycock, Fubar !!! Better to sell the stock as high as possible to get out and then back in when it’s convulsing in a splattered heap on the ground. If you were to exit some time after the market started to sell and then come back in after the dust settled, you would be in a substantially better position than just letting the investment move, in fact, although the market is now dancing around. of 12,000. It would still be 15% BELOW the market high of $ 14,164. Isn’t that what brokers are supposed to do?

Anyway, I get sick on fast roller coasters.

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