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Who Is Making Money On Stocks Now?
Stock Picks-May be your real job
Nothing in this article is aimed at getting anyone to buy stocks or other instruments in any of the major or minor markets, here or abroad. Having studied thoroughly games of chance, researched, and experienced both wins and losses, particularly at poker, the market beats all games of chance for fun, for profit, and the joy of seeing your winning stock picks in the top ten or twenty almost every day.
Well, my friends will argue, "you use a professional stock advisor to make your selections." True, I listen to all news about the markets, world events, trends in fashions, oil and gas, mining, earnings, jobless data, housing starts. A winning market player wants the best, most timely information there is. It's smart to pay for research that consistently leads to performance. It is simply a cost of doing business in a murky and changing investing climate. Only the investor may select stocks, or at least sign off on them. After all, it is your money.
Early on, around 1987 when the writer started trading, he just put money into Fidelity and Invesco or let a broker at Olde make suggestions.
This is the best way to trade if you are working. However, in a market correction like we have today, it is well to look for the best paying, no -load mutual fund and put it there. Best implies a winning manager, in a fund that has been around for awhile, looking out for the investor. Growth with low taxable payouts in your peak earning years is an important goal. Research, as always, is key to finding superior funds, based on your criteria.
Why not just invest in the S&P 500 and build an IRA? Institutions can do that and not do badly. In a correcting market the little guy gets killed by the less than stellar growth in the Dow. In fact, the market is minus 12 for the year, and sinking as of June 18, 2008.
Investors in this market are chewing their nails and sweating blood. The market is gyrating off in all different directions. Adviser's, as usual, place their bets on a very large number of horses. Some may win, with a little luck, some will bump along with tiny wins but not enough to make up for the major valleys slow in the uptake. Brokers recommend everything, of course. That's precisely how they make their living. They own the candy store.
There are the newsletter/newspaper-glossy promoter ads, "pump and dump," is one name for them. They have no interest in the stock whatsoever. They get paid up front to write slick and fast color copy usually for one stock.
Kramer is funny and often throws out some pretty good picks. He is right around 60% of the time,* He does good work in the community, donating money to his foundation.
There are traders on Motley fool who routinely pick winners in the 90% accuracy range. Until they kicked the writer off for frivolity, his score was 80-98%.(no joking about stocks). Frankly, the writer did not invest in his picks. There is no requirement that anyone do so in these contests.
A new trader wishing to learn about the market without losing his/her life savings probably won't win the game without spending time leaning the basics. The market language is useful to know. Any of the on-line brokers will have useful information they will pass on for free.
PE and PS, price to book, eps, yield, return on equity, and volume are basic but not difficult concepts to grasp. Yahoo has a great stock site where you can compare a stock's performance with another to get the overall picture.
Yahoo provides all sectors and the stocks available in each. Basic information is shown, including return on equity, dividend, and market cap.
It is no secret that the majority of investors buy high and sell low. It is human nature to shy from the stocks that have shed price and buy into a rising market. Consistent and professional players do the opposite, buying lower and selling when they reach a pre-assigned price. They will totally ignore stocks with multiples that are too high, knowing from experience that buying into sharply rising markets will shave their profitability. Not that they won't jump into a bargain when they see one. there are some rare but compelling opportunities, such as when the market is going up wildly on all stocks. Selling short can be a smart play when stocks are driven higher for no other reason than speculation. A stock breaking from a stalled position into new highs is a buying opportunity. News of a buyout will drive prices, as will favorable economic news and earning reports. Zack's bets on stocks with surprises in their earnings. Wild swings in price result from higher or lower earnings surprises. Many successful players make a living knowing how to trade only on short sales.
The Nightly Business Report rarely reports on foreign stocks. They are bound to their sponsors on Wall street and certainly have little incentive to report that 17 other stock markets are doing better than the U.S., and have done so for the last several years. This is important information for the investor to know, wouldn't you think?
The U.S. Market no longer leads the global marketplace and foreign markets are readily available through American Depository Receipts, as well as other easily exchange traded funds and initial public offerings, along with Vanguard, Fidelity, and several other funds that operate funds in foreign countries available for the U.S. investor.
Rarely do stocks meet the writers standards when recommended by a broker. How to know that? Every stock is checked and checked again, first entered into a notebook where it is later studied carefully. If it meets all the accepted criteria, it is moved to another book and compared to others in its sector. If it passes muster, the information is noted for further reference.
This is the writers "guide book"that goes to the morning market open and stocks from it placed on a trading platform, such as Scottrade, where a quick trade can put it into the buyers column. Every trader has a system, and this one works best for this writer. Many of the tentative stocks will show up on the top lists, quickly, and with little fan-fair. The trader may even place an order the night before the market opens to not miss the pressing market demand for the stock.
When a scientific or cognitive approach is combined with the trader's belief in his/her ability to accurately pick the winners, then the winning combination is within reach. These are the consistent leaders in a down market, where stocks rise along with equity, regardless of conditions. These are the performers that tend to show up in the news and usually outperform peers and other sectors.
Knowing when to sell for maximum profits and a re-entry point are important. It takes discipline to follow a prescribed rule that was set far away from the "action." It requires extraordinary patience as well, such as when a favored stock is down in a rising market. Waiting a day or two will often see these winners bounce back in multiples. Daily tracking is important to monitor how well the pick is doing. Meanwhile, alternates await to be placed into active trade. There are rules your chosen broker will keep you apprised of, such as day trading and margins. Before making a trade, the traded is advised to know the rules or stupid and costly mistakes may cost more than you may make up in a trading season. If a potential trader is unable to find the information needed to become a successful trader, he/she would be better served by avoiding self-picking and trading in the market.
Many professional traders lose money in the short haul, and some never get over their fear and avoid trading altogether. The market is not unforgiving, but the pros act as if it is and do their diligent research. There are a few hotshots that have a feel for markets and make money easily. There are a few high stakes poker players who manage to bluff, intimidate, and read their opponents, The market has the advantage in that there is more information, readily available, without the capriciousness of the turn of a card...most of the time.
In these volatile markets, with inflation reducing buying power, a simple savings account will diminish in value, along with your ability to keep up with prices. Reputable brokers will advise investors not to risk any more than they can afford to lose. It is well to mention that foreign stocks no longer come with the risk they were once noted for. Furthermore, With the Euro and other currencies putting pressure on the dollar, investing in foreign markets gives the investor an advantage on the exchange rate. As you will find too, the dividend rate is higher than the U.S.
The writers two accounts are presently showing a 70% and 30% year to date increase, respectively. While markets may be down, sectors such as fertilizers, natural materials, renewable energy, as well as energy in general have been outstanding. Precious metals, copper and coal are leading the way. Steel is outstanding due to global demand. Price pressure on grains is significant due to the price increases on corn. This is likely to continue as the weather affects crops negatively in the heartland.
Finally,The real power players in the markets advise that they pay little attention to the rise and fall of the market. Buffet isn't interested in what everyone else is doing, but is looking for superior stocks bought low and held for outstanding profits. No matter how many times it is advised, buyers wait and buy when they feel they are surrounded by enough buyers to justify his/her own buy. The thunder you hear, is these same buyers exiting at once on the latest rumor, fear, or perceived threat. Waiting on the sidelines are the lions who buy these valuable securities and then sell on their own initiative, at a price that insures a profit.
A seasoned player understands the psychology of the market and isn't afraid to use the information to make a profit. It is at this junction that great players of any game, who have had their mettle tested in reality, share similar traits that make them great players and winners. Few among these gloat or brag, and many such as Kramer, contribute mightily to good causes. The hustle, the con, and easy money are not part of their stock in trade.
There are similar traits in most great poker players They are adverse to the nickle and dime cheats and shills that come and go, working their cheap hustles until caught and sent on their way. Interestingly enough, many of these characters may be standout players-until they realize they are winning.
They may curse at losses, whine and plead for regress from helpless onlookers. But the truth is they expect to lose, and do. Winners never whine at a loss. It is accepted as a cost of doing business. It may be studied in case the loss might be avoided in the future. One gains respect from others in the way his business is conducted. Respect is important in a game. It may lead to higher percentage of wins in poker. Self respect helps winners feel that way.
Self-respect may often effect favorably on choices made in the market. Whiners and losers ignore many facts that would lead to more winning ways. A winner sticks to his chosen stock based on facts. The loser bails out at the first sign that others are bailing. Too late he may attempt to re-enter, paying too much in commissions and on the inflated price. there are exceptions, of course. Everyone has the capacity to learn and profit from mistakes. If the mind is open and due diligence practiced, anything is possible.
Feel free to write about what makes your choice of systems work for you in the market. Criticism is welcomed, as are comments.
* You may check Kramer's stock picks on Motley Fool.