Effective Advice For A New Generation of Investors
CATCHING A FALLING KNIFE
One of the most common mistakes made by inexperienced investors is trying to "catch a falling knife". This is a habit, common among new investors, of buying stocks that are in "freefall", and it's a bad idea for an investment strategy. Unfortunately, it's common even among old and experienced investors. I have to admit that I've even made that mistake myself.
There are two primary approaches to investing: fundamental analysis, and technical analysis. At my firm, we generally fall into the fundamental camp, since we evaluate stocks based upon their valuations, rather than looking primarily at their short-term price movements. We take this direction because we believe this provides the greatest potential for long-term success.
Just looking at the fundamentals of an investment, however, can limit an investor's profits and lead to some unpleasant positions. This is because there are real limitations to buying a stock as it falls. You may purchase a stock that looks great at $10, only to see it fall to $5. If the stock rises again to $20, you may have been "right" to buy at $10, but maybe you weren't "right enough". Buying at $5 would have yielded a 300% return, while you settled for only 100%. Furthermore, if you thought that $10 was a reasonable price, you might have saved time by buying it on the way back up instead of on the way down.
Let's face it: buying a stock that is in mid-fall is not a pleasant experience, and it isn't difficult to come up with a variety of other strategies that will bring better results.
Still, we shouldn't avoid all stocks that have dropped. In fact, studies show that investors who buy stocks that have fallen hard, tend to outperform the market on a regular basis. In fact, this "bottom-fishing" strategy can provide one of the best performance levels of all, but missing out on these opportunities can be costly.
The decision then is not whether to buy "fallen angels", but when. This is where a bit of technical analysis skill comes in handy. Unless you're willing to buy any piece of junk that happens to have good price momentum, technical tools can't really tell you which stocks to buy. But they can lead us to a better understanding of timing. Once you select a good investment based on fundamentals, it is time to decide when to put the money down. A good first step: watch for a positive movement on good volume before committing. As long as the stock is dropping, there is a good chance you may get it at a better price. Better to wait a few days (or weeks) to assure your purchase is timed right. There's no advantage to buying before the time is right, even if the choice of stock is ideal. In this case, patience really is a virtue.
Remember: don't try to catch a falling knife - pick it up after it hits the floor!
R. Scott Pearson is an investment advisor, writer, editor, instructor, and business leader. As President and Chief Investment Officer of Value View Financial Corp., he offers investment management services to a wide variety of clients. His own newsletter, Investor's Value View, is distributed worldwide and provides general money tips and investment advice to readers both internationally, and in the U.S.
Prior to founding Value View, Scott edited the Pearson Investment Letter for eight years, and served as a Registered Investment Advisor for Pearson Capital Management. His newsletter articles and recommendations have been reprinted in other leading investment publications, including Investor's Intelligence, Bull and Bear and the Dick Davis Digest. In addition, he has written columns and articles of general interest for various newspapers, covering a wide range of topics from investments and IRAs to mortgages and credit issues.
43 Years of Investing Wisdom in Just Minutes Entrepreneur
Value Investing Is Back Kiplinger's Personal Finance
One of the Biggest Mistakes in Investing A Wealth of Common Sense
A guide to investing in gold Yahoo News
The investing conundrum: Too much information but not enough ... Westfair Online
Are You Your Own Worst Enemy When It Comes to Investing? The Motley Fool
Personal Principles With Investing??"Part I Financial Advisor Magazine
Investing & Finance New York State Attorney General
Fact Sheet: Investing in America: Biden-Harris Administration Boosts ... - US Department of Commerce
Fact Sheet: Investing in America: Biden-Harris Administration Boosts ... US Department of Commerce
NBA star Giannis Antetokounmpo on promoting financial literacy through sustainable investing - CBS News
NBA star Giannis Antetokounmpo on promoting financial literacy through sustainable investing CBS News
Investing in Exxon Stock The Motley Fool
Stanford's Ashby Monk sees 'portfolio positioning' as the future of ... Pensions & Investments
6 Best AI ETFs to Buy for 2023 | Investing | U.S. News U.S News & World Report Money
Investing in Facebook Stock The Motley Fool
Stock Market Sell-Off: Where to Invest $500 Right Now The Motley Fool
Join These Motley Fool Investors for "The Market Cap Game Show" The Motley Fool
Altria Pivots Post-Juul: This Week in Cannabis Investing Kiplinger's Personal Finance
Where to Invest $1,500 Right Now The Motley Fool
Investing in Johnson & Johnson Stock The Motley Fool
Yield Curves and Debt Ceilings: Investing Beyond the Headlines AllianceBernstein
GMO Takes Pragmatic View On Climate Change Investing Financial Advisor Magazine
‘Basically all’ B2B software investing is focused on A.I. right now. Companies without a strategy may be left behind - Yahoo Finance
‘Basically all’ B2B software investing is focused on A.I. right now. Companies without a strategy may be left behind Yahoo Finance
Impact Investing vs. ESG Nasdaq
Why Focusing on This One Aspect of Investing Can Make You a ... The Motley Fool
What Microsoft and Google Stock Investors Should Know About ... The Motley Fool
Jill Biden making 4-state 'Investing in America' blitz in preview of possible reelection deployment - CNN
Jill Biden making 4-state 'Investing in America' blitz in preview of possible reelection deployment CNN
How to Invest in Apple Stock The Motley Fool
Investing in Coactive Andreessen Horowitz
Roku Stock Is Up Nearly 50% In 2023, But Investors Shouldn't ... The Motley Fool
Understanding Sector Investing and Market Sectors | Chase Chase News & Stories
Virginia Tech's Commodity Investing by Students and alumni take a ... Virginia Tech Daily
Investing in Wingspan Andreessen Horowitz
Core Inflation: What is Value Investing? | Chase Chase News & Stories
Women aren't investing at the same rate as men. Here's why it matters—and how the gap can be closed - CNBC
Women aren't investing at the same rate as men. Here's why it matters—and how the gap can be closed CNBC
Investors Seek Safety in Tech Stocks, Money-Market Funds The Wall Street Journal
4 Dates for Disney Stock Investors to Circle in April The Motley Fool
Investing in Believer Andreessen Horowitz
Tesla Deliveries, Jobs Report Headline Investing Action Plan Investor's Business Daily
Investing in Character.AI Andreessen Horowitz
Factor-Based Investing Strategies Morgan Stanley
1 Valuable Lesson Growth Investors Learned From the SVB Collapse The Motley Fool
Investing in CCP Games Andreessen Horowitz
10 Tips to Get Started With Investing in 2023 The Motley Fool
Waiting 20 Years Can Cost You Millions - Dont Wait Start Today
Many Young people live for Today. They really don't fully understand the power of compound interest.
Day Trading Strategy or Stock Trading Software? The Way You Pick Stocks Affects Your Results
The trading method you employ to approach the stock market can make a big difference in your results.Stock trading is a very competitive field and in order to succeed you need to FOCUS on a set of simple strategies that you can implement without hesitation.
Making It Second Nature
Not long ago I was laying on my son's floor throwing one of his toy balls back and forth in the air to myself and I had a strange revelation. I noticed that as I threw the ball up in the air my left arm automatically started to move to where the ball was going to come down.
Raising Capital Using a Public Company
Going public in this manner is ideal for companies that may not be large enough to attract an underwriter for an IPO and those that don't need to raise capital immediately. They want to go public because of the many benefits that being a public company offers such as increased valuation, using public stock as currency to acquire other companies and assets, liquidity, prestige and to reduce the need for expensive venture capital and other financing sources.
How To Find An Investment Advisor
Do you think you need an Investment Advisor? Hold on before you answer because this is sort of a trick question. Also, I am definitely biased because I am an Investment Advisor.
The Conflict of Interest Game
Disgruntled investors are going after Wall Street once again, this time accusing one of investment bank Morgan-Stanley's high-tech mutual funds of making biased stock picks.Recent lawsuits allege the Morgan Stanley Technology fund was influenced to buy and hold stocks of companies that delivered huge investment banking fees - or could potentially bring big business - to the investment bank.
Out-Of-State Investors Check List of Questions
The following lists of questions are suggested questions to ask before you plan to purchase residential real estate outside of your neighborhood.It's probably best to speak with at least three licensed real estate sales professionals and three property managers in the area.
College Savings Plans - Are They The Best Choice For My Child?
College Savings Plans - are they the best choice for my child?College Savings Plans, also called Section 529 plans, are one of the best ways to save for college because they offer:- Tax advantages- A variety of investment options- Flexible contribution options- Parental control- Little impact on eligibility for need-based financial aidTax advantagesInvestments in 529 plans are usually exempt from federal taxes. Earnings are tax-deferred and are not subject to capital gains taxes.
Rolling your 401k: Contributory IRA vs. Rollover IRA
In an ideal world you would start your working career with a great company in your early 20s, steadily climb the corporate ladder, retire at age 65, and draw a sufficient income from your accumulated 401k account to live happily ever after.Unfortunately, that's not how the real world works.
Is a SEP Plan Right For Your Business
A SEP is a special type of IRA. Under a SEP plan the employer creates an IRA account for each eligible employee, hence the name SEP-IRA.
The Real Cost of a Bad Habit
What is the value of a good habit? Think of some daily habits, like brushing your teeth, or buckling a seat belt, or flushing. All of these habits have value important to some part of life.
Powerful Options Basics Lessons Improving your trading in 180 days.
An option is a traded security that is a derivative product.By derivative product we mean that it is a product whose value is based upon or derived from the price of something else.
Coca-Cola - A Value Stock?
There has been much talk lately about Coca-Cola and its potential as a value stock - as it now spots a dividend yield of 2.6% (which is the highest dividend yield since the late 1980s) and a P/E or less than 21 - right at the bottom of its five-year low.
Makin The Sauce
Let's face it, you're on a roll. After getting down to your attorney's office to sign the new Living Trust and then diligently tracking down your assets to fund the trust, you should be congratulated.
Retire Dollar Smart
Jim Miller is a registered investment advisor. This means that he is not beholden to a particular brokerage or financial institution.
Creating a Financial Future--Putting Your Plan Into Action Part 2
Real Estate can be a useful tool for investing. The simplest real estate investment is not truly an investment, but a cost-reduction - that is owning your own home.
Poll Names Coin Laundries Best Investment For 2005
According to Morton Pollack, CEO of PWS, The Laundry Company and editor of the newsletter, "Historically, laundry owners have been a quiet group. Knowing they are onto a good thing, they've been pretty reticent.
How to Terror-Proof Your Money
"To drift is to be in hell, to be in heaven is to steer." -GeorgeBernard ShawFormer Homeland Security Director,Tom Ridge, has said it's not a matter of "if"we'll have another terrorist attack, but when.
Wit and Wisdom on Money, Wall Street and Success - Part #4
Can you concisely summarize your investment philosophy in a few sentences? My experience is that most people can't. The quotes that follow are diamonds that offer a real powerful education in the world of Risk Management.
Investing In Sons Business Could Cause A Real Family Feud
Q: My youngest son wants to borrow $5,000 to start his own business. My wife is afraid to tell him no.
|home | site map|