rahul_parab2006
Rahul Parab
1) Invest for maximum total real return-
This means the return on invested dollars after taxes and after inflation. Any investment strategy that fails to recognise the insidious effect of taxes and inflation fails to recognise the true nature of the investment environment. It is vital that you protect purchasing power. One of the biggest mistakes people make is putting too much money into fixed-income securities.
Today’s dollar buys only what 35 cents bought in the mid 1970s, what 21 cents bought in 1960, and what 15 cents bought after World War II. If inflation averages 4%, it will reduce the buying power of a $100,000 portfolio to $68,000 in just 10 years. To maintain the same buying power, that portfolio would have to grow to $147,000- a 47% gain simply to remain even over a decade. And this doesn’t even count taxes. “Diversify. In stocks and bonds, as in much else, there is safety in numbers.”
2) Invest — don’t trade or speculate-
The stock market is not a casino, but if you move in and out of stocks every time they move a point or two, or if you continually sell short… the market will be your casino. And, like most gamblers, you may lose eventually-or frequently.
You may find your profits consumed by commissions. Every time a Wall Street news announcer says, “This just in,” your heart will stop.
Keep in mind the wise words of Lucien Hooper, a Wall Street legend: “What always impresses me,” he wrote, “is how much better the relaxed, long-term owners of stock do with their portfolios than the traders do with their switching of inventory”.
3) Remain flexible and open-minded about types of investment-
There are times to buy blue-chip stocks, cyclical stocks, corporate bonds, US Treasury instruments, and so on. And there are times to sit on cash. The fact is there is no one kind of investment that is always best.
Having said that, I should note that, for most of the time, most of our clients’ money has been in common stocks.
A look at history will show why. Look at the Standard and Poor’s (S&P) Index of 500 stocks. From the start of the 1950s through the end of the 1980s - four decades altogether-the S&P 500 rose at an average rate of 12.5%, compared with 4.3% for inflation, 4.8% for US Treasury bonds, 5.2% for Treasury bills, and 5.4% for high-grade corporate bonds.
In fact, the S&P 500 outperformed inflation, Treasury bills, and corporate bonds in every decade except the ‘70s, and it outperformed Treasury bonds - supposedly the safest of all investments - in all four decades.
4) Buy low-
Of course, you say, that’s obvious. Well, it may be, but that isn’t the way the market works. When prices are high, a lot of investors are buying a lot of stocks. Prices are low when demand is low.
When almost everyone is pessimistic at the same time, the entire market collapses.
More often, just stocks in particular fields fall. Whatever the reason, investors are on the sidelines, sitting on their wallets. Yes, they tell you: “Buy low, sell high.” But all too many of them bought high and sold low. Then you ask: “When will you buy the stock?” The usual answer: “Why, after analysts agree on a favorable outlook.”
This is foolish, but it is human nature. It is extremely difficult to go against the crowd - to buy when everyone else is selling or has sold.
But, if you buy the same securities everyone else is buying, you will have the same results as everyone else. By definition, you can’t outperform the market if you buy the market. And chances are if you buy what everyone is buying you will do so only after it is already overpriced.
Heed the words of the great pioneer of stock analysis Benjamin Graham: “Buy when most people…including experts…are pessimistic, and sell when they are actively optimistic.”
Bernard Baruch, advisor to presidents, was even more succinct: “Never follow the crowd.”
So simple in concept. So difficult in execution.
SOURCES :-
>>>World Monitor: The Christian Science Monitor Monthly
>>>DNA India
This means the return on invested dollars after taxes and after inflation. Any investment strategy that fails to recognise the insidious effect of taxes and inflation fails to recognise the true nature of the investment environment. It is vital that you protect purchasing power. One of the biggest mistakes people make is putting too much money into fixed-income securities.
Today’s dollar buys only what 35 cents bought in the mid 1970s, what 21 cents bought in 1960, and what 15 cents bought after World War II. If inflation averages 4%, it will reduce the buying power of a $100,000 portfolio to $68,000 in just 10 years. To maintain the same buying power, that portfolio would have to grow to $147,000- a 47% gain simply to remain even over a decade. And this doesn’t even count taxes. “Diversify. In stocks and bonds, as in much else, there is safety in numbers.”
2) Invest — don’t trade or speculate-
The stock market is not a casino, but if you move in and out of stocks every time they move a point or two, or if you continually sell short… the market will be your casino. And, like most gamblers, you may lose eventually-or frequently.
You may find your profits consumed by commissions. Every time a Wall Street news announcer says, “This just in,” your heart will stop.
Keep in mind the wise words of Lucien Hooper, a Wall Street legend: “What always impresses me,” he wrote, “is how much better the relaxed, long-term owners of stock do with their portfolios than the traders do with their switching of inventory”.
3) Remain flexible and open-minded about types of investment-
There are times to buy blue-chip stocks, cyclical stocks, corporate bonds, US Treasury instruments, and so on. And there are times to sit on cash. The fact is there is no one kind of investment that is always best.
Having said that, I should note that, for most of the time, most of our clients’ money has been in common stocks.
A look at history will show why. Look at the Standard and Poor’s (S&P) Index of 500 stocks. From the start of the 1950s through the end of the 1980s - four decades altogether-the S&P 500 rose at an average rate of 12.5%, compared with 4.3% for inflation, 4.8% for US Treasury bonds, 5.2% for Treasury bills, and 5.4% for high-grade corporate bonds.
In fact, the S&P 500 outperformed inflation, Treasury bills, and corporate bonds in every decade except the ‘70s, and it outperformed Treasury bonds - supposedly the safest of all investments - in all four decades.
4) Buy low-
Of course, you say, that’s obvious. Well, it may be, but that isn’t the way the market works. When prices are high, a lot of investors are buying a lot of stocks. Prices are low when demand is low.
When almost everyone is pessimistic at the same time, the entire market collapses.
More often, just stocks in particular fields fall. Whatever the reason, investors are on the sidelines, sitting on their wallets. Yes, they tell you: “Buy low, sell high.” But all too many of them bought high and sold low. Then you ask: “When will you buy the stock?” The usual answer: “Why, after analysts agree on a favorable outlook.”
This is foolish, but it is human nature. It is extremely difficult to go against the crowd - to buy when everyone else is selling or has sold.
But, if you buy the same securities everyone else is buying, you will have the same results as everyone else. By definition, you can’t outperform the market if you buy the market. And chances are if you buy what everyone is buying you will do so only after it is already overpriced.
Heed the words of the great pioneer of stock analysis Benjamin Graham: “Buy when most people…including experts…are pessimistic, and sell when they are actively optimistic.”
Bernard Baruch, advisor to presidents, was even more succinct: “Never follow the crowd.”
So simple in concept. So difficult in execution.
SOURCES :-
>>>World Monitor: The Christian Science Monitor Monthly
>>>DNA India
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