Smart Investing Tips

Are there any smart investing tips in today’s dismal stock market? Smart investing tips should always include staying current on fundamentals of the market. Fundamental analysis of stocks is essential even though it can be depressing as today there is a lot of bad news to digest. Technical analysis is necessary to follow stocks in a chaotic market as big news typically disrupts things and leads to a period of market inefficiency where bargains get overlooked. One of the time honored smart investing tips is credited to a 19 th century investor, Baron Rothschild, who observed that the best time to invest is when there is blood, including one’s own, in the streets. Although this old saying certainly can apply to physical violence it typically is applied to markets in the doldrums because of bad news. So, what are some smart investing tips today?

Most smart investing tips really have to do with following process in order to exploit opportunity. There is really no free lunch in stock investing . Those who rely upon “tips” commonly get into an investment too late to gain maximum profits. Investors typically profit when they scout out a stock with a low price to earnings ratio coupled with the prospect of future gains and a margin of safety in the form of cash in the bank or unencumbered hard assets. This is the homework that stock investors ought to be doing every day in order to find promising stocks. It is also the kind of work investors should be doing periodically in order to update their stock portfolio with good new stocks and cull out the losers. The best time to cull out losers is when a rising tide has raised all stocks (ships). It is not when bad stocks have hit all-time lows when the entire market falls, as it has done recently. Smart investing tips in the form of promising stocks are those that are likely to prosper when the market recovers or will prosper no matter what the market does. High tech medical stocks are a good example of the latter case as a bio engineered cure for diabetes, Alzheimer’s or Parkinson’s Disease will make the inventor, and his investors, rich no matter what the stock market is doing.

Are there smart investing tips as regards an assessment of the “big picture?” In today’s case we should ask if the US President and both houses of the US Congress will show the kind of leadership and integrity that it will take in further debt and budget discussions to avoid a repetition of the game of “chicken” we just witnessed. Then we should ask if that is really necessary. Many US multinationals have both substantial operations and substantial assets overseas. Economic failure of the US and Europe may become less of a concern as the economies of Russia, India, Brazil, and China come to the fore. Smart investing tips in this matter are twofold. One is to look seriously at companies that will do well if the US resolves it debt dilemma and do as well with their international operations if the US fails. The other is to look at diversifying to overseas stocks in growing economies with little debt. Smart investing tips here could have to do with picking new winners with manufacturers in India, oil operations in Brazil, and natural gas reserves in Russia. As always we are not suggesting a specific stock pick or tip but rather an enlightened approach to stock investing in today’s difficult markets.

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