You should ignore analysts on TV, the radio, the paper and other TALKING HEADS when it comes to investing!
What stocks do they speak about? – The same old group, every day of every year – Why? Since they do not know any better, they’re sheep such as the general public, repeating what every economic textbook states and every other economist tells them to say. Everyday, the very same organizations are highlighted on the evening news.
They are not going anywhere. A few of the stocks which produce the headlines each night were leaders of this market 20 years back. New cycles bring new leaders; this has been proven year in and year out. So many of these TALKING HEADS shout out about”buy and hold” but what are they holding? They hold old high-flyers which were superstars but have become fallen stars that sit 20%, 50% or even 90% from the all-time highs (some might have given you a little return – 10% or less over the previous five years – WOW – BIG DEAL!) . Yes, possibly over 15 or 20 years, you’ll receive your money back – but what’s the point? Many of these”so-called” investors tell you how they have XYZ stock and it’s returned them 65 percent BUT they exit the essential variable that it takes 16 years to reach there.
Among the most powerful and most promising stocks of the early 1900’s (1920 decade) was RCA – this inventory was one which people claimed you place in your portfolio and hold it until near death – it won’t ever fall and if it does, continue because it is going to return. Well, let’s have a look: RCA jumped over 1100% during the 1920’s and crashed with the rest of the marketplace in the early 1930’s. It went from a very low 0f $8.70 to a high of $106 to a crash amount of $3.00. Some said to hold, some stated purchase on every dip. – Guess what, it did not climb back to pre-crash degrees until 1963! 30 years to break even for a few. Perhaps that stock in your portfolio is the RCA of yesterday; history always repeats itself since human nature is always the same!
Stocks are worthy to be held over long intervals, this is an established fact but do not EVER hold a stock when it’s flashing SELL signals left and right (especially if everyone on TV is telling you to buy now on the dip,”it’s a deal”). These talking heads were saying this about each stock in their computer screen in 2000 and 2001 -“buy the dip”. The only dip was the man on TV and all the suckers watching him/her. I do not mean to offend anyone but you will need to take charge of your investment life, you will need to learn why stocks go up, why they return and NO STOCK is resistant to a bear market like the one we just had.
Leaders of the industry today, will not be leaders in the future – to some rare occasions, a stock here or there will withstand everything and grow decade after decade, but even these stocks finish their awesome rise sooner or later. Same is true for older leaders, they won’t direct the markets of today – they become too big and their growth slows, preventing them from being outstanding growth stocks and providing you excellent returns. Today – I never said you could not have a stock like this, lots of men and women are happy with these firms, they”feel secure”, that is fine; everybody has different targets.
Allow the market tell you what is going down or up. Watch”sister shares”, I discuss them in our education section of the site. What do I mean by sister stocks? They’re stocks that are in exactly the same industry. Once an industry is powerful, the majority of the stocks in this class will grow, hand in hand. (I say most – not all, laggards always remain behind). Fundamentals will be powerful for many stocks in the group and technicals will direct you along the trip – think of technicals as a road map.
Once fundamentals are established, check the graphs, if several stocks from a specific group are breaking from foundations, this is a powerful indication that something great is going to occur in this group. The more positive the entire market the greater the group will do (bear markets tend to hold down nearly everybody ). Why buy a stock which has great fundamentals in a poor group? If the rest of the stocks in that category are acting weak, this might be telling you that the”one” bright spot in this group will eventually return to the bunch, so don’t chance it. Investing is all about lowering your risk! Do not take a risk on a stock that looks good but the business is hurting.
Purchase the leader of a group where many stocks are showing strength. Never purchase the cheap stock that’s lagging in performance, this is a sure way of losing money – purchase the best of the group – the one with the best fundamentals (accelerating earnings, ROE, earnings, etc.) and technicals (basing pattern, breakouts on huge volume, relative strength, etc. ). .) . What may appear high into the general public; typically turns out to be reduced to the clever professional investor. I am not referring to the”talking heads” on TV – the intelligent investors work for associations – they move the market! When they purchase, everyone knows because quantity jumps to intense amounts or levels not found in previous months or years. The everyday guy does not possess this power – ONLY institutions possess this power – learn to comprehend this power, here lies the intelligent money.
Finally, as I grind this educational information in your subconscious mind, ignore the”Talking Heads” and learn how to obey the market. Cost and quantity will always give you the best advice.