Sound Investment

10 years 8 months ago #15910 by Rock
Replied by Rock on topic Sound Investment
The Syrian Crisis:
Should You Bail on Stocks?

In recent weeks the stock market - already consolidating the heady gains of the past four years - has begun to wobble in anticipation of an impending military strike against Syria.

Here's what investors fear. If the Syrian crisis worsens, the war could spill over into other parts of the Middle East. Oil - which has already spiked to $110 a barrel - could go substantially higher.

Higher energy costs combined with an anemic economy would be bad for GDP growth and for corporate profits. That, in turn, would cause stocks to turn lower. So should you get out now?

Absolutely not.

Yes, the crisis in Syria is bad. And the prospect of U.S. involvement adds a whole new dimension. But that doesn't mean the scenario above - or something like it - will necessarily unfold.

And even if it does, it still wouldn't be wise to sell your stocks.

We've Survived Worse

Over the years, the stock market has faced just about every kind of crisis imaginable. In the 1950s, we saw the Korean War and the creation of the Warsaw Pact. In the 1960s, we saw the Cuban Missile crisis - often called "the most dangerous 13 days in American history" - and the Vietnam War.

In the 1980s, we had the Latin American debt crisis, the S&L debacle and the failed military attempt to end the Iranian Hostage Crisis. In the 1990s, we had the Gulf War, the collapse of Long Term Capital and the Asian Financial Crisis.

In the 2000s, we had 9/11, the bursting of the technology stock and housing bubbles, and the Great Recession. In the 2010s, we witnessed a currency crisis in the eurozone and the Greek bailout.

Now a civil war in Syria threatens to engulf Lebanon and other countries in the Middle East as well.

Yet you'll notice that through all our national problems, crises and setbacks, the stock market has always come roaring back. That's because the free-market system is based on the sturdiest, three-legged foundation:

1.All people have economic needs: food, clothing, shelter, energy, healthcare, financial services, etc. Government doesn't meet those needs. Businesses do.
2.People are motivated by rational self-interest. They pursue profit by forming and expanding businesses to meet our economic needs.
3.Businesses require capital to start and expand. That is the reason for the stock market. Companies raise money by going public and capital markets provide the liquidity for risk-takers to invest and divest.
At some level, virtually every investor recognizes these things. What they often fail to recognize is the incredible resiliency of the stock market over time. News headlines make them anxious and fearful and they bail out - only to regret it later.

Don't Repeat Past Mistakes

When I spoke at investment conferences during the recent financial crisis, for instance, I told investors that this was likely one of the great buying opportunities of our lifetimes. I pointed out that business owners and managers were laying off nonessential personnel, cutting costs to the bone and refinancing debt at lower levels. I suggested that with the ship tightened, even a modest uptick in sales would drive corporate profits sharply higher.

But some people were too scared to listen. They lacked a historical perspective on the resiliency of the market. And missed out entirely.

Don't make that same mistake today. Yes, the stock market may go lower in the short term. But if you're investing to reach long-term financial goals, don't act in such a way as to thwart those long-term interests.

You may want to move into LARGER-CAP STOCKS FOR LOWER VOLATILITY OR CONCENTRATE ON VALUE to provide a greater margin of safety. But don't abandon stocks altogether.

History shows there will always be wars. So don't lose the battle for financial security by waving the white flag.

Good investing,

The following user(s) said Thank You: Gin

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10 years 8 months ago #15934 by Rock
Replied by Rock on topic Sound Investment
There are other reasons why making a fortune in penny stocks is easier said than done..........


For starters, the vast majority of tiny, unprofitable companies are such ridiculous long shots they don't even merit your attention. Other than that:

· Most companies offering penny stocks have little if anything in the way of profits, not to mention the first prerequisite for profits: sales.

· Second, you could drive a cement mixer through the bid/ask spread on many of these shares. If a stock is offered at $0.30 and bid at $0.24, for instance, you're down 20% as soon as you get your trade confirmation. (And that's before commissions.)

· Third, penny stocks are thinly traded and easily manipulated. You may buy a penny stock and see it zip higher, but then have trouble getting out. It's pretty disheartening to know you can drive down the price of a stock simply by selling your own shares at market.


There are plenty of outright scammers in the marketplace.

Often referred to as a "pump and dump," a penny stock scam is when the insiders talk the stock up on one hand while bailing out like there's no tomorrow on the other.

That's usually because despite the great story - and make no mistake, the stories are fabulous - the company's business prospects are usually nil.

But penny stock promoters want you to trust them, to believe in the hot tip and ensuing fortune to be made.

If you're going to evaluate a penny stock, here's how they'd like you to do it:

By the multi-billion-dollar market they intend to operate in.

By the enormous profits they'll generate when their technology is finally commercialized.

By the proven reserves of the mining company operating next door.

By the results of their Phase 1 trials.
By any criterion you can think of besides what the company is actually doing right now.

Because what the company is doing right now is... usually nothing.

If you insist on examining these stocks, at least take a few basic precautions.


Start by reading the company's most recent quarterly or annual report.

Does it have sales or earnings?

What kind of debt is it carrying?

How long has the company been in business?

Who are the people behind it?

In other words, if you're going to roll the dice, make sure it's a genuine speculation, not just a mindless crapshoot... or worse.

Also, take a look at what the insiders are doing. If the insiders - the ones who can hardly contain their enthusiasm for the company's business prospects - are dumping the stock en masse, you know all you need to know. Run.

Some will say I'm unduly pessimistic. (Penny stock promoters, especially.) And, clearly, a few successful companies did start out as penny stocks.

But for every success story there are at least 100 penny stocks whose charts bear an uncanny resemblance to the last flight of the Hindenburg.

In short, there are plenty of smart ways to invest your money. Toying with penny stocks and expecting to bank a fortune, in my view, is not one of them.

Good Investing,


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10 years 8 months ago #15947 by Rock
Replied by Rock on topic Sound Investment

1. When we needs the cash; and

2. When the investment thesis in the company has changed.

In investing, we’re often weighing the relative benefits between different companies that vie for our attention among our limited dollars as there’re only that many shares we can buy. But, when we run out of investable funds and yet manage to find a share selling at a much greater bargain than what we have in our portfolio currently, I feel that selling shares to acquire the better-bargain can be a great move.

For those who only have a fixed amount of cash to work with, they often have to make judgments about the relative attractiveness between a share they already own and one which they don’t. In such cases, I think that selling a share to purchase a better bargain elsewhere would be a great reason for them to sell.

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10 years 8 months ago #16019 by Rock
Replied by Rock on topic Sucessful Investment
When applied to investing, it means that we should focus on what really matters, namely the economics of the businesses that we own shares in. If a company is doing all the right things to grow its business profitably, then the share price should reflect that over time. It may not happen immediately but in time it should.

Unfortunately, many of us tend to use share prices as a barometer to gauge our success or failure when investing. Many of us tend to focus on daily price movement rather than the potential growth of the companies.

Successful investing is about having absolute confidence in the companies that we choose to be a part-owner of.

But to do so, we have to understand:

1. How the business functions

2. How it goes about making money.

If you can do those two things well, then you are unlikely to fall into the trap of letting fear of the unknown (of which there are many) deter you from investing, even when anxiety about macroeconomic events is at its highest (which can be often).

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10 years 8 months ago #16081 by Rock
Replied by Rock on topic Sucessful Investment
Should We Listen to Crash Predictions?

"I've been hearing things about an upcoming stock market crash and total ruin. The guy who is predicting this now, predicted the '08 crash. Is there anything to this and if so, what if anything can be done to protect ourselves?"

Our PM Lee does not see a repeat of the Asian financial crisis that sent economies in the region into a deep dive. United States, the causes of large capital flows into Asia as their central banks printed money and slashed interest rates, will remove these measures with care so as not to destablise the own economies. Certain individual countries may have problems, on banance which causes by the outflow of funds.

The best investing approach is to choose great companies and stick with them for the long term. I believe in companies with resilence businesses.

My stock-pick for this point of times are:
The following user(s) said Thank You: zane

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10 years 8 months ago #16142 by Rock
Replied by Rock on topic Sucessful Investment
Growth stocks, while sexy, are not easy to spot from the outset. Chances are, investors will end up with a number of bombs before stumbling on a winner. Even when stumbling on a winner very often cash out too soon.

On average, under-valued established businesses with steady cash flows are better bets. It must be able to pay out dividend. Best of all turn out to be a "Perpetual Dividend Raisers" that grow their dividends yearly.

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