 |
|
Nov. 23, 2009
JWisdom.com: Actually, it really is all about you with Rabbi Lawrence Hajioff
Nov. 20, 2009
Nov. 19, 2009
Jonathan Tobin: ADL Crosses the Line with Report Bashing Obama Critics
Nov. 18, 2009
JWisdom.com: The (Jewish) Dating Game
with Rabbi Lawrence Hajioff (8 minutes)
Nov. 17, 2009
Steven Emerson: How Does the 4th Amendment Impact Terror Finance Investigations?
JWisdom.com: If Frank Sinatra married Edith Piaf
with Rabbi Y.Y. Rubinstein (2 minutes) Life lessons from what would be regarded as the most inappropriate lyrics ever sung
Nov. 16, 2009
JWisdom.com: Deconstructing faith
with Rabbi Warren Goldstein (9 minutes)
Nov. 13, 2009
JWisdom.com Sarah's subjective reality
with Rabbi Sroy Levitansky ( 6 minutes)
Nov. 12, 2009
JWisdom.com Does God get tired?
with Rabbi Harvey Belovski ( 5 minutes)
Nov. 11, 2009
JWisdom.com Marriages are not made in Heaven
with Rabbi Lawrence Hajioff (VERY fast 15 minutes)
Nov. 10, 2009
Michael Doyle: Author of book exposing CAIR ordered to remove supporting documents from Web
JWisdom.com If the creation so loudly shouts the existence of the Creator, why aren't more people believers? with Rabbi Naftali Brawer (9 minutes)
Nov. 9, 2009
Mark Steyn: Shooter exposes hole
in U.S. terror strategy
JWisdom.com It's never too late to
have a happy childhood with Sarah Chana Radcliffe (5 minutes)
Nov. 6, 2009
JWisdom.com Zero to 1/60th: How
to Empower An Hour with Gavriel Aryeh Sande (7 minutes)
Nov. 5, 2009
JWisdom.com Hidden Hints: Unlocking
Faith & Prayer with Rabbi Jay Yaacov Schwartz (10 minutes)
Nov. 4, 2009
JWisdom.com When God played peacemaker
With Rabbi Sroy Levitansky (5 minutes)
Nov. 3, 2009
JWisdom.com Are you are closet idolater?
With Sara Yoheved Rigler (10 minutes)
Nov. 2, 2009
JWisdom.com Abraham's Strange Change
With Rabbi Yitzchok Fingerer (5 minutes)
|
| |
Jewish World Review
Oct. 10, 2007
/ 28 Tishrei 5768
Investors find boring often can be fruitful
By
Gail Marks Jarvis
| 
|
|
|
|
http://www.JewishWorldReview.com | (MCT)
Q. I am 24 and have been saving in my 401(k) for about a year, but I find mutual funds boring. So I started paying attention to stocks. I discovered that I was good at spotting those that would do well. For a while, I just made a mental note of stocks I liked, but when I saw them go up I decided to buy my first stock. It was Garmin, which makes navigation devices for cars. I bought it for $70 and I made money immediately. Now I'm wondering how to decide when it's time to sell. Are there some rules of thumb?
A. When it comes to investing money for your future, boring can be beautiful.
In fact, you might be asking your question now because Garmin Ltd. stock has suddenly plunged. That might mean your initial excitement has turned to fear, dread or confusion.
After soaring to more than $122 a share in late September, shares fell below $100 in just a couple of days. That's a tremendous drop in a short time. And you are probably wondering what it means: Whether you should bail now and lock in your $30 gain on the stock or hope for the magic to return.
Boredom might feel better at this point.
Morningstar Inc. analyst Pat Dorsey suggests taking your gains and getting out now unless you know more about the future of the company than your question suggests.
The stock plunged because of competition, the bane of a hot stock. Nokia, which makes telephones, is acquiring digital map-maker Navteq Corp. And that means Garmin could have another significant competitor in the navigation device business as Nokia blends navigation with cell phones.
Investors don't like it when they see competition shaping up. A stock might have been a high-flier, and its products might be good, but when competition shows up, it means it is tougher for a company to make a profit, no matter how good the company is.
This is critical for investors to realize, especially those who buy hot stocks without understanding what will drive the stock price higher. Stocks do not go up over time unless a company is as profitable, or more profitable, than investors think it will be.
And if an investor simply buys based on the obvious, a good product in a growing market, they are likely to be disappointed, Dorsey said. Every other investor sees the obvious, and that is usually built into the stock price people are paying.
The disappointment may not come at first. Momentum and investor excitement can drive a stock higher for a while. But when a high-flying stock drops 20 percent, that can be a sign that "people have changed their opinion about a stock," Dorsey said.
And that can mean that holding on and wishing for an old stock price to return can be folly.
Too often individual investors don't sell when they should.
They see a $50 stock go to $40, and say they will wait for $50 again. Then the stock goes to $35, and they wait for $40 to return.
Dorsey, who wrote "The Five Rules for Successful Stock Investing," suggests studying a stock before buying it. When you do that, you decide upfront what you think will drive profit and by how much.
On that basis, you decide if the price of the stock is too high. If you pay too much, you could have a solid stock but still encounter a plunge in price.
If profit is lower than expected, that could be a reason to sell. If sales growth slows because a competitor is taking business, that could be a reason.
To learn how to analyze a stock, try the "research wizard" tool found under "stock research" athttp://www.moneycen tral.com. It walks you through the type of analysis professionals use.
If you do not want to do this analysis, stick to mutual funds. Even if you build up $1 million by retirement, that may not be enough. With the impact of inflation, such savings would only buy what $300,000 would today.
As a rule of thumb, you should be investing at least 10 percent of your income in your 401(k) so you have enough for retirement.
Then, if you want to use a little play money to invest in stocks on the side, go for it. But do it thoughtfully.
Picking stocks is tough. Even professionals get it wrong. But because mutual funds often hold 100 stocks or more, you have insulation if one stock suddenly takes a turn for the worse. The stronger stocks in a mutual fund buffer the effects of losers.
There is safety in numbers, and you have a better chance of winning with 100 stocks than one or two.
Professional stock pickers who work for mutual fund companies generally set what are called price targets when they pick a stock. They analyze all the factors that they think will drive profit, and then estimate where the stock price should go. They promise themselves to sell the stock when it reaches that point.
When that time arrives, they will re-examine their analysis of the stock and see if there is new information that suggests profit will be greater than they thought. If so, they will raise their price target and hold on.
Sometimes even they succumb to wishful thinking when stocks perform badly. They set up disciplines, like noting profit assumptions, to fight the urge to trick themselves.
If you are serious about picking stocks, learn to do this analysis. Although you often hear about stocks that are so strong you can buy and hold them for life, you must continually revisit your analysis and see if the reason for holding the stock remains sound.
Even solid stocks often lose their luster.
The Leuthold Group recently researched how stocks hold up over time.
They reviewed the 100 largest stocks of 1966, or the equivalent of such stocks as Exxon Mobil, General Electric and Microsoft today. Only 23 of those companies from 1966 remain on the list of the largest 100 stocks.
The next time you want to buy a hot stock and figure it will be as good as gold for life, consider Polaroid. It was a hot stock in the early '70s. A few years ago, it filed for bankruptcy, leaving shareholders high and dry.
Every weekday JewishWorldReview.com publishes what many in the media and Washington consider "must-reading". Sign up for the daily JWR update. It's free. Just click here.
Gail Marks Jarvis is a personal finance columnist for the Chicago Tribune and author of "Saving for Retirement without Living Like a Pauper or Winning the Lottery." Comment by clicking here.
Previously:
10/01/07: Make up lost time with swift, smart action
09/24/07: Balance is key for investing by retirees
09/18/07: Homeowners who wait see options fade
09/04/07: Easy matter to rate fund's performance
08/27/07: Mortgage mess could be good for savers
08/17/07: Small stocks are coming with large caveats
© 2007, Chicago Tribune Distributed by McClatchy-Tribune Information Services
|
|
Arnold Ahlert
Mitch Albom
Michael Barone
Dave Barry
Tony Blankley
Andy Borowitz
David Broder
Stratfor Briefing
Mona Charen
Linda Chavez
Ann Coulter
Greg Crosby
Larry Elder
Suzanne Fields
John Fund
Frank J. Gaffney
Lloyd Garver
Jonah Goldberg
Julia Gorin
Jonathan Gurwitz
Paul Greenberg
Lewis Grossberger
Victor Davis Hanson
Betsy Hart
Nat Hentoff
David Horowitz
Laura Ingraham
Cheri Jacobus
Jeff Jacoby
Paul Johnson
Jack Kelly
Ed Koch
Ch. Krauthammer
Michael Ledeen
John Leo
David Limbaugh
Kathryn Lopez
Rich Lowry
Michelle Malkin
Jackie Mason
Dick Morris
Bill O'Reilly
Jim Mullen
Clarence Page
Kathleen Parker
Dennis Prager
Wesley Pruden
Tom Purcell
Jonathan Rauch
Celia Rivenbark
Robert Robb
Cokie & Steve Roberts
Pat Sajak
Debra J. Saunders
Culture Shlock
Roger Simon
Michael Smerconish
Thomas Sowell
Mark Steyn
John Stossel
Cal Thomas
Bob Tyrrell
Diana West
Dave Weinbaum
George Will
Walter Williams
Byron York
Mort Zuckerman
Robert Arial
Chuck Asay
Baloo
Chip Bok
Dry Bones
Lisa Benson
John Branch
Gary Brookins
John Cole
J. D. Crowe
John Deering
Brian Duffy
Everything's Relative
Mallard Fillmore
Jake Fuller
Bob Gorrel
Joe Heller
David Hitch
Jerry Holber
Steve Kelley
Jeff Koterba
Dick Locher
Chan Lowe
Ranan R. Lurie
Jimmy Margulies
Rick McKee
Michael Ramirez
Kevin Siers
Jeff Stahler
Ed Stein
Danna Summers
John Trever
Gary Varvel
Kirk Walters
How 2
Lori Borgman
The Savvy Consumer
Elder matters
Fixit
Dr. Peter Gott
GET A JOB! by Marty Nemko
Richard Lederer
Tech Maven
Every Monday Matters
Nutrition Myths
Bookmark These
Bruce Williams
How Stuff Works
|
