Archive for December 27th, 2009

Know What to Invest and What Not

“The time to obsess about macro factors has probably passed,” reports Citigroup’s chief global equity strategist Robert Buckland. “If a stock has decent prospects through the cycle, then buy it. Stop worrying about where we are in the cycle. It’s too late for that.” According to Buckland, stock picking is back in full swing. Historically, independent financial advisors say, cherry picking the best types of stocks has yielded the best returns. During particularly volatile markets, investors tend to go into survival mode and shift to the friendly giants that yield lower returns and promise a safe, steady return. Yet finance experts from Canada to Australia to the United States report that consumer confidence is beginning to shift.

Considering the Microsoft investors who put in ,000 in 2004 have .5 million today, it’s no surprise that top financial advisors are out on the hunt for “the next big thing.” Industry-wise, some of the best stocks are in title insurance, retail, hotels, basic materials, movie production, confections, jewelry stores, silver, resorts and casinos. By contrast, some of the worst stock picking industries are wholesale, banking, auto parts wholesalers, food, diversified utilities and aluminum. Some people believe that “industries don’t fall — companies do,” so they try to spread their dollars across one dominant industry or two that seem to be bringing in decent returns consistently.

There are many different types of stock picking strategies. Some of the most common include Fundamental Analysis, Qualitative Analysis, Value Investing, Growth Investing, GARP Investing, Income Investing, CAN SLIM, Dogs of the Dow and Technical Analysis. While there is limited space to delve deeply into these complex strategies here, more information can be found at Investopedia (www.investopedia.com/university/stockpicking/stockpicking1.asp). Even when consumers learn financial investment techniques, there is no guarantee, however. According to Investopedia: “The bottom line is that there is no one way to pick stocks. Better to think of every stock strategy as nothing more than an application of a theory; a ‘best guess’ of how to invest.”

Stock picking can be done by individuals or by professionals. Top financial advisors work to assist clients in selecting a winning stock portfolio. While these individuals are undoubtedly more experienced in watching economic market fluctuations, they are still human and ultimately fallible. One should not simply entrust an enormous sum of money with a financial advisor, without looking over the periodic statements and watching the DOW/NASDAQ activity. All investing is a gamble, so expectations should be clear when getting started. Perhaps the best advice is still “don’t put all of your eggs in one basket!”

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