"Only great
minds can afford a simple style."
Stendhal
Welcome to The
Golden Sense! Everyone has got their own style. Some women like to
wear black and white fashion while others prefer bright colors. Some women like
both depending on the season. Style is a personal preference. When it comes to
investing, style is incredibly important because your style often dictates
the return you receive on your investments.
If you are new to
investing, the first thing you need to do is take an approach that fits your
line of thinking. Everyone approaches a question or problem in a different
manner. When it comes to investing there are a couple of approaches that
are often used.
Top-down Investing
Top-down investing
strategies involve choosing assets based on a big theme. This means looking at
the big economic picture and observing the general trend of the market over
the long term.
For example, if an
investor anticipates that the economy will grow sharply, he or she might
buy stocks across the board. Or the investor might just buy stocks in
particular economic sectors, such as industrial and high technology, which tend
to outperform when the economy is strong.
If the investor
expects the economy to slump, it may spur him or her to sell stocks or take
positions in bonds or less volatile stocks.
Many top down
investors have chosen precious metals for their investing strategy. They see a
decline in value of all international currencies over the long term and have
chosen to protect their wealth by acquiring assets that retain and appreciate
in value.
"The great
advantage of top-down is that you're looking at the forest rather than the
trees," says Mick Heyman, an independent financial adviser in San Diego.
That makes screening for stocks or other investments easier.
Bottom-up Investing
Bottom-up investors
choose stocks based on the strength of an individual company, regardless of
what's happening in the economy as a whole or the sector in which that company
lies. The idea behind this style of investing is that if the company has strong
branding and financial health the share price should rise over time.
Bottom up investors believe that good companies last and can weather
the changing economic seasons ahead.
Fundamental Analysis
Fundamental analysis
involves evaluating all the factors that affect an investment's performance.
For a stock, it would mean looking at all of the company's financial
information, and it may also entail meeting with company executives, employees,
suppliers, customers and competitors. You will want to analyze management
and really understand what's driving the company and identify where
the growth is coming from.
Technical Analysis
"What I'm
interested in is price, not the story behind the movement." Richard
Russell
Technical analysis
involves looking at the trends of an investment's price. You choose assets
based on prior trading patterns. This type of security analysis is
used for forecasting the direction of prices through the study of past
market data, primarily price and volume.
The power in
technical analysis is that you can see the asset's price at any single moment
and it reflects all the information available about it.
Contrarian Investing
Contrarian investors
choose assets that are out of favor.
Contrarian investing
echo's Rothchild's famous quote:
"Buy when
blood is running in the streets".
A contrarian is one
who attempts to profit by investing in a manner that differs from the
conventional wisdom, when the consensus opinion appears to be wrong. If people
are heavily selling a particular type of security, contrarian investors will
jump in and buy that security at bargain prices.
"The contrarian
style is generally aligned with a value-investing strategy, which means buying
assets that are undervalued by some statistical measure", says Wharton's
Geczy.
The contrarian style
generally rewards investors, but you have to choose the right assets at the
right time. The risk, of course, is that the consensus is right, which results
in wrong bets and losses for a contrarian investor.
Dividend investing
As the name suggests,
dividend investors buy stocks with a strong record of earnings and
dividends. Investors like stocks that pay a dividend because it offers
them a regular payout. This payout acts as an additional source of
income.
"Even if the
price goes down, at least you're getting some income," says Russ Kinnel,
director of mutual fund research at Morningstar.
It's a nice way to
supplement income if you're retired. However, it is important
to beware of funds with extremely high yields. That could be a sign that
companies are taking out sized risk and are headed for a decline.
In the end, it's
important to choose the investing style that fits your lifestyle and
personal mindset. Chopping and changing strategies will often yield below
average results so it is important to stay with an approach that you identify
with.
Saving money in today's
world is extremely difficult. Incomes are low and expenses are high. However,
saving money is still possible. Saving and investing are a mindset and you can
make it happen if you want to. It just involves a little sacrifice. When you
start saving and investing it is very boring -- b-o-r-i-n-g. Or I should say
it's boring until (after seven or eight years) the money starts to build
up and pour in. After that, believe me, investing becomes very
interesting. In fact, it becomes downright fascinating!
It is your choice when to
start.
Sincerely,
T. Norman
Lipper reports
municipal bond funds saw outflows of $1.2B in the in the end of July, driven by
concern Detroit's bankruptcy filing could set a precedent and lead more cities
to follow. This marks the 9th straight week of municipal bond outflows.
Detroit's bankruptcy could be just the tip of the iceberg as many other cities
and states are in just as bad a shape financially. Furthermore, the Dodd
Frank Act has indirectly restricted bank funds from investing
in municipal securities by issuing burdensome credit reporting
and research requirements for each municipal bond owned. Now, Bank's don't
want to deal with the hassle so they no longer purchase municipal securities as
a part of their portfolio.
Simon Black of
Sovereign Man reports:
July 11, 2013
Athens, Greece
Athens, Greece
My friend Illias took
a drag of his cigarette as he contemplated my question.
"Our government
tells us that this will be a better year. No one really believes them. But all
we can do is be optimistic. Too many people are committing suicide."
His statement
probably best sums up the situation in Greece right now. It's as if the hopelessness
has gone stale, and the only thing they have to replace it with is desperate,
misguided, faux-optimism. And anger.
There are roughly 11
million people in this country. 3.4 million of them are employed, of which
roughly one third work for the government.
1.34 million people
are 'officially' unemployed. To put this in context, it would be as if there
were 36 million officially unemployed in the US.
More startling, if
you add the number of 'inactive' workers (i.e. those who gave up looking), the
total number of unemployed is roughly 57% of the entire Greek work force.
And as you probably
know, the situation for young people is even worse. Only 1 in 3 people aged 25
and under have a job.
This phenomenon,
sustained for several years now, has cut deeply into the psyche of an entire
generation that is growing up without productive work experience or the
prospect of improving their lives.
The middle class here
has been completely gutted. Aside from a few pockets of wealth, the country is
either unemployed or working poor, hamstrung by debilitating debt.
The ugly consequence
of all of this is that people have been driven to desperation. The suicide rate
here has skyrocketed, crime is noticeably higher, and prostitution is rampant.
The government is
limping along based solely on handouts from the rest of Europe, adding to the
country's already untenable debt burden. Given the rate at which they keep
increasing the debt, they'll still be paying it off ten generations from now.
They've taken some
baby steps to attract foreign investment-- most notably by offering residency
to foreigners who purchase Greek real estate in excess of 250,000 euros.
But such initiatives
won't move the needle much. And the Greek government has no real options other
than to continue defaulting on its debts or to leave the Eurozone and inflate
its own currency.
Given what I'm seeing
on the ground here, it's clear that the situation is more explosive than it has
been for years.
References:
http://www.sovereignman.com/
http://ww1.dowtheoryletters.com
