What are the top stocks for a long term investment (bonds, IRA)
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I have roughly 8k in a Roth IRA on the sidelines.
I thinking of buying aapl and F...
I think stocks are the better route then mutual funds.
What are some top inflation stocks to get into.
Are dividend stocks the best way to go?
I am absolutely confused and don't want to trade
stocks bi-weekly and chase.
Thank you.
I think you ought to go to the library and check out some books before your do anything else.
Pretty much everyone that has studied the way stocks perform suggest that it is unwise to think you can beat the broad market average over long periods of time. Research further shows that the broad market averages about 9% return. Of course there are periods of time when it does much worse and some when it does much better. Unfortunately it is impossible to know when those periods stop or start until they are over.
THUS almost every sane investment plan should be HEAVILY concentrated on broad market indexes BUT also tracked on some kind of consistent basis so that you don't get swept away when things are likely to be unusually negative AND ALSO have at least some portion of your investments in firms, that at least for a while, will probably do better than the broad market.
If you get books like those by Peter Lynch, John Bogle, or Charles Ellis you will get a much more thorough understanding of how and why this works.
Personally there is probably some upside to putting a bit of your dough into Apple and maybe even Ford, but it would be silly to think these are "set and forget" type stocks. If the iPad does not do well Apple will fall, maybe a lot, and Ford makes cars for people that will very much react negatively to changes in both tastes, fuel use and the broad economy. If you set a "target price" where you would comfortable reallocating these funds as Apple & Ford either climb or decline that would be easy way to lock in profit / minimize loss.
Investing in dividend stocks is a completely different strategy, and even in that there are many sub-specialties -- some stocks lock in dividends even in a bad ecconomy , because they are things that people cannot do without (food, energy) those tend to be more "set & forget" but with changes in the merger / acquisitions strategy of food companys & possible shifts in energy policy that is less true than it used to be. There are also firms that pay nice dividends that sell bad stuff (tobacco) that may some day will have no customers alive... Another category of high yield dividend stocks are due to special circumstances -- the REIT (real estate investment trusts) fall into this category now -- although some have solid cash flow, because their commercial tenants are paying their leases as agreed to, the underlaying value of the shopping centers and office buildings is basically in free fall. Should any major shock force the tenants to stop paying, cash would disappear fast. If the lenders change the terms of their mortgages or refuse to allow modifications the REITs would be wiped out. Definately NOT something you would be able to just leave on autopilot.
When it comes to "inflation stocks" that is an odd way to say 'are their firms that will benefit when rates increase' and the short answer is "probably not" -- higher rates will mean more people will be drawn to things like bonds and even CDs, but that won't help the equity markets, as the ability for banks to make from high rate CDs is flat out WORSE than when they can charge pretty high interest rates to consumers and BORROW FROM THE FED for ZERO. Similarly bonds that are paying a high rate are not associated will real "growth of capital" but as a why to try maintain the buying power of savings. A grim thought...
I want to echo Chet Everett's comments regarding the basics of investing. Way too many people see past performance and predict future gains based on said performance. That said, a TON of people see the performance of the market over the past year and its ~50-60% gains and thinks "WOW! I CAN DOUBLE MY MONEY!" Wrong! That was a once in a 20 year chance, unless you're Goldman Sachs and get insider news and rig the system to your favor.
So yea, do read up on how the market, stocks, funds, etc. work and then we'll talk.
Personally ... I would say F is bought out and is trading around where it should be. People have already priced in (speculatively) that F is on the path to recovery. That is a VERY RISKY PROPOSITION! Car sale in the US aren't going to return to bubble-year sales as banks no longer lend money to joe schmoe's with two dimes in his pocket and imaginary renters who don't actually exist in his McMansion. That said, I do think F is strategically placed to grow long term (say, next 5-10 years) and I too have been looking at Fords to buy my next car, but I agree that for a non-dividend stock, it's a risky bet. A better time would have been when it was at $1.50. It was CRAZY low.
For AAPL, that is an even riskier bet in my book. AAPL has been priced in and really don't have an exciting lineup in the future to drive future growth. SUre they could amaze us in the next few years, but the truth of the matter is, they probably aren't going to make a dent in Microsoft's influence and market penetration. Further, a blogger wrote a piece on Steve Jobs' health, making up a rumor he had cancer, and the AAPL stock nosedived about 15%. ANY stock which is dependent on ONE PERSON or ONE GROUP OF PEOPLE as opposed to PRODUCTS is a speculative buy at best.
For people like you, I highly suggest mutual funds that are low or no load and pay dividends. IF you have a normal job like me and can't focus on investing, that is the best way to go. Now if you're crazy and don't sleep (like me) then maybe. But do read up first.
If you believe the market will advance, I would buy index ETFs covering the portions of the market you think will advance most. If you don't believe the market will advance, then obviously, you have some decisions to make.
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Individual stocks are very tough to pick for the long haul, and they can sink your boat in a hurry. One piece of bad news can sink a single stock (look at Toyota, and it was much more solid than your picks. This will get REALLY bad as lawsuits and fines follow their recalls (thus stock is currently adjusting for 'pre-pricing' based on projected future earnings)). Fully understand your company, balance sheets, value line...NEVER listen to analysts, as you best know more than they do, as you are NOT getting commissions for 'pumping' a loser. The market is to be considered very accurately 'forward' priced, as lots of information is available and you have very smart folks doing speculation pricing months in advance (based on very good statistics). You are playing with the 'Big-Dogs', and be sure THEY have a exit strategy (and so should you).
For inactive traders, the ETF's are best, and you can put 'trailing stops' to capture gains. Otherwise use no-load mutual funds (disadvantage is; no way to put limit orders or to trade inter-day). Understand moving averages and sector analysis if you are picking buy points, otherwise Dollar cost average into ETF's with solid holdings and HIGH trading volumes (and to assure you have a buyer, come exit time).
Don't be so sure the market is going up, stuff is not very pretty in DC. Inflation protection MAY NOT be handled in the traditional ways if the Gov doesn't quit dinking with businesses. Listen to the market, it will tell you by its actions, follow the leaders and understand why they are leading and what that is telling the market. Remember, it has had an exceptionally good yr since last March. A blood bath may be in the works with the tax changes due in 2011 (Bush cuts expire 2010). Congress is very ineffective and has been sitting on their thumbs for over a year. (except when raising hands for spending AND raising the debt ceiling). I am guessing they are petrified. As you probably know, most of them couldn't 'Run a Lemonade Stand' (as is frequently mentioned by a popular financial commentator).
Read some good investing books (as Chet mentioned), hang out at Bogleheads.
Last edited by StealthRabbit; 02-25-2010 at 01:30 AM..
I have read a ton of investment books, but the best one IMHO is Jeremy Siegel's The Future for Investors because it is based upon research on ~100 years of stock returns. The company with the highest annual return over a long period is Altria, which is the holding company for the Philip Morris tobacco company.
What is the common theme? Consumer staples, pharmaceuticals, and cigarettes. Nothing fancy or faddish. Skip Apple; it is a play on people buying the latest plaything and as already mentioned, everything has been priced in. Don't go for fads, car companies, airline companies, or consumer discretionary.
No offense, but lists like that are ALWAYS just a snapshot AT A SINGLE POINT IN TIME!!!!
Far more useful would be the SCREENING CRITERIA that was used to come up with such a list. There is no way that such a list heavy with consumer consumables will be the best for long term growth. When I ran some screenings on finance.google.com based on growth (earnings, earnings per share) none of those were more than "middle of the road" and some were negative...
Last edited by chet everett; 02-25-2010 at 09:10 AM..
Two words: BERKSHIRE HATHAWAY. Or, put another way, BRK-B. Seriously, I would consider replacing Apple with Berkshire Hathaway, and replace Ford with a Walmart, Coca-Cola, or McDonalds type blue chip stock that pays a decent dividend.
My only other suggestion is to echo the others sentiment and suggest you read up on stocks. I recommend reading either "One Up On Wall Street" or "Beating The Street" by Peter Lynch (the stocks he talks about are dated, but his principals are not), and "The Snowball" by Alice Schroeder, basically an authorized biography of Warren Buffett. Best of luck to you.
One thing that I was thinking about at work (not a very exciting day for a change) is that the future will likely see advances in biotech, pharmaceuticals, and long-term care that allow people to live productive lives longer.
As boomers retire, they'll likely want to spend their money but they have to maintain their lifestyles. They will be active in helping their children raise their grandchildren, go camping, hiking, etc. Many will delay retirement into their late 60s or early 70s, or "double dip" (retirement plus come back out of retirement as a consultant with their own hours and high wages). So, pharma, medical, biotech.
Gen Y, my generation, unfortunately, will be saddled with so much debt that I think much higher taxes and a lower quality of life are in the cards. That means a more conservative approach towards staples makes a whole lot of sense. Also, since I am a pessimist and see storm clouds brewing over China, I really think there is a future conflict on the horizon against an emergent superpower versus the world's established one, defense companies would likely be a good bet, but not at the moment with defense budgets shrinking. Green energy will likely mix in with the rising needs of energy demand worldwide, but again, invest in conglomerates that do green energy, or ETFs.
No offense, but lists like that are ALWAYS just a snapshot AT A SINGLE POINT IN TIME!!!!
Not at all. The Top 20 list that I posted are the results of investing in each of the mentioned companies beginning 1 March 1957, and ending 31 December 2003. That is most definitely NOT a single point in time, but rather over a period of around 46 YEARS.
That Philip Morris (Altria) has returned 19.75% on an annualised basis over a 46-year period is remarkable considering the ups and downs in the overall market, the lawsuits that they have faced, and the changing tastes of consumers. It is precisely the reason that I recommend Siegel's book to investor wanna-bes. It is based upon research into the real returns, not pie-in-the-sky projections.
I purchased shares of MO in 2005. Since then I have also received shares of Philip Morris International and Kraft as they were spun off from MO. All three have paid out dividends AND increased those dividend payments. For example, in the past five years, my dividend payments from MO have been increasing at a 13.2% annual rate. That is better than anything that I can get in bank CDs or passbook savings accounts.
I don't know why people look real results in the face and say, "NAW, not for me."
Last edited by Teak; 02-26-2010 at 01:46 AM..
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