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My strategy is to look at everything.....mostly stocks and commodities.
-Look at the long term macro picture (is it a 10 or 15 year bull market?). Then go from there in individual stocks or commodities.
For example, gold has crushed the S&P 500 over the last 10-13 years. S&P flat, gold up...500% or something from its bottom at $270 an ounce.
-With individual stocks, I think you really have to know the industry. Warren Buffett has a phrase about your "circle of competence". Knowing the perimeter of that circle and staying inside is one of the keys to successful investing. How many people do that? Very few.
You *really have to know it*. If a stock has been hammered....like in the 08 crash, you can buy almost any well run company and get good returns (i.e. like GE). But in most market conditions, you should have a narrow focus.
-Expansion sounds good, but its not a breakthrough or panacea for a company. I.e. Tesco recently failed in the US.
There's "good expansion", when a company knows whats its doing and has a good driver....i.e. Starbucks in the beginning or McDonalds (even during their middle expansion). Then there's boredom expansion, arrogance.....you don't know what you're doing. I.e. the Tesco grocery, or something that totally flops.
I wouldn't mess with penny stocks unless you've made some real money in the markets ($10-20,000 at least) or have 2-3 years of experience.
look at what long term treasuries did the last 13 years too. they also soared.
there is a whole world of stuff out there and anyone who thinks they are going to time the moves from asset class to asset class as things change is fooling themselves.
you need to own the things that are out of favor all the time. the magic comes from rebalancing and buying more of that loser so when its day comes you own way more of it .
as i point out ofton:
even if you bought gold at the absolute wrong price of 800 bucks back the 1980's ,if you rebalanced that gold with the rest of your portfolio yearly then today your return on the gold actually edged out the return of the s&p 500.
that is the power of having a strategy and a plan and sticking to it.
You should learn about asset allocation and buy low cost index mutual funds. If you want to play around with individual stocks, set aside a maximum of 10% of your portfolio as "play money".
Check out the bogleheads message board. A lot of smart and wealthy people frequent that site.
My "strategy" is to buy a wide variety of products (including bonds, mutual funds, etc) over a long period of time, investing regularly (monthly deposits), and looking at the long term.
you can't help but wonder how many individual stock buyers hold issues like apple where they are great companies yet plunged 40-45% and what it did to their overall returns on the few other holdings they have.
most individual stock buyers do not own nearly enough issues so a major hit on anyone of them kills all the gains in the rest.
just for the record i bought apple the other day at 390.30 . but that is a speculation for me , my investments are much more diversified..
The best investment strategy is the one you'll actually stick with for the long term (think decades, not months or years). For most people, that means regularly investing in a well managed balanced fund that invests in a mix of stocks and bonds. People tend to stick with these funds for the long term because they don't lose as much in bad markets. They don't go up as much in good markets, but over long periods of time, the better balanced funds match or beat the large company S&P 500 stock index with less volatility. Pick one of these funds and try to stick with it for a few decades (or even longer):
Oakmark Equity & Income
Dodge and Cox Balanced
T. Rowe Price Capital Appreication
Vanguard Wellington
Mairs and Power Balanced
If you can get one of these funds in your 401K without paying the sales charge/load, then they are also good:
American Funds Income Fund of America (A, R4, R5, or R6 share classes only)
American Funds American Balanced Fund (A, R4, R5, or R6 share classes only)
American Funds Capital Income Builder (A, R4, R5 or R6 share classes only)
Invesco Equity and Income (A or Y share classes only)
Last edited by mysticaltyger; 04-20-2013 at 03:33 PM..
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