Find Your Investing Style

"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

 

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