- posted 11 years ago
Tips to Succeed in Stock Market
Legendary Investor Warren Buffett once advised, "Be greedy when others are fearful." Buy when you cannot find a Bull. Thanks to a fear-filled summer, many top notch stocks are still trading well below their potential, giving savvy investors the opportunity to strike it rich.
Time to Get Greedy?
Graham taught Buffett to ignore the markets and focus upon buying the underlying worth of the stock. Buying stocks below their book value and having a margin of safety were key Graham investing themes. Graham taught Buffett to look beyond the current stock price to the "intrinsic value" of the stock. And, then, to only buy the stock if it could be purchased at a steep discount to its intrinsic value, giving a large margin of safety
Buffett's partnership portfolio over ten years grew by a modest 1,156% compared to the Dow's 122.9% and other major world indices.
The Start of a Bull Market ?
The bottom of the market starts at a time when the stock market is weak and the general population is pessimistic. At this point most investors sell after having endured a long and torturous bear market. This extreme pessimism found at a bottom is always irrational and undeserved. Now the market is undervalued and is a bargain. Savvy investors, the ?smart money?, buy bargain stocks knowing that they will be able to sell them higher in the near future. Smart money buying, called accumulation, causes stocks to rise. The smart money often consists of NYSE specialists, Nasdaq Market Makers, hedge fund traders and corporate insiders. These traders have access to information that the general public does not.
Rising stocks eventually gain the respect of mutual funds, as Billions of dollars of capital is introduced into the market place. Mutual fund investment causes the stock market to advance in a powerful manner. Much of the steady large trends are powered by mutual funds and other institutional investors.
Stock Market: Buy or Not?
When you go to the store and see a pair of designer slacks that you've had your eye on for some time on sale, do you buy them? Or, do you fret, thinking that if you wait they might be even more discounted? Of course, in the latter scenario you stand the risk of someone else buying them first and they aren't available at all.
Such is the state of the current stock market. If you buy now, the market could go down further and you'll be sorry. If you wait, the market could go up, and you'll still be sorry because you didn't buy earlier. Dissatisfaction with your decision can plaque you either way... That is just plain disconcerting.
Will you become the next Warren Buffett? Yes or No. But, I'll leave you with this: "History repeats itself", and we can learn a great deal from history. And, hopefully, not repeat the mistakes of others. Maybe, even, in some limited way, we can repeat some of the successes others before us have achieved, if we understand their methodology at the time and absorb some of the lessons they have learned in the past.
-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.