How Folks who love 'HIP HOP' Can Profit From Wall Street
As a kid I used to wonder why everyday on the evening news around 5:30 pm central time. The CBS anchorman Walter Cronkite would report the Dow Jones Index went up or down today. Living in rural South Louisiana, on a small farm, and going to church on weekends I never saw any relationship of the Dow Jones Index to my everyday life.
However, when I got my first job, the HR counselor asked me how much would I like to invest in the 401K plan and how would l like to distribute it among mutual funds. I quickly said intelligently 'put it in cash' and let me go research my options. My research consisted of asking peers, parents and family members. As you can imagine, I got 10 different answers from 10 different people.
After reading several investment books, talking with investment professionals and reading the Wall Street Journal daily, I could not make a confident decision. Thank goodness for MONEY MAGAZINE, KIPLINGER and USATODAY. I could relate to people's success stories and the 'common sense' investment philosophies of financial gurus Warren Buffett and Jack Bogle.
For the small investor, picking common stocks is like throwing darts in a sports bar (hit or miss). Unless your research and develop a simple philosophy at home, you don't know what you might 'hit' that can 'devastate' your financial future in public.
Researching stock market history, one discover there a effective 'indicators' that improve ones chances to make money in the stock market. I would like to share some 'lessons learned' and discoveries that will help anyone make money in the stock market over a lifetime.
First and foremost, try to find and invest in Industry Leaders. Business Week and Fortune magazine publishes the Top Global Companies by industry ranking every year.
Make a list of all number 1 companies by industry in the magazines. Then type into Google 'growth industries in the world'. A Google search will provide you with multiple websites that lists the top 10 - 25 global growth industries. Match company and industry to this list of 'growth industries'. My dad once told me never put money on a 'donkey' that I did not think was going to win the race. Investing in a market leader in 'growth trends' positions one to make money in any economic environment, especially companies that offer products that people use everyday.
Evaluate and add small companies and technology firms to your list, if they offer a product that has a significant breakthrough that has a chance to dominate a growing market.
In 1935, a group of guys formed Lexington Corporate Leaders Investment Trust, which selected 30 corporate leaders (equal number of shares) in America for a stock portfolio.
Over the past 70 years, this investment criterion, has either matched or surpassed the S&P 500 index or Dow Jones Industrials Index. This classic buy and hold investment strategy works. The small investor should consider this approach, due to limited time to research stocks due to church, community and family obligations.
It is highly recommended to stick to stocks that have a price/earnings ratio that is lower than the Standard and Poor's index 500 or Dow Jones Industrial Index. Historically, lower the P/E ratio of the stock (4 -24) the higher the potential return. If the P/E ratio is greater than 25, the market maybe overpriced (overheated) and a meltdown is on the way.
To find this information, go to Google 'current S&P 500 p e ratio' and compare this number against your selected stocks. The P/E information for your selected stock can be seen on yahoo.com (financials) website.
Next, look for the dividend yield column, see if the dividend yield number is between 3-5 %. According to Ibbotson Associates, which track historical stock returns, during the 1930s -1980s, the return rate on stock investment was between 7 - 10 %. The high returns was due to 5% dividend yield in most companies, which was reinvested in blue chip (market leaders) growth stocks.
A wise tip that's given by most stock brokers is 'buy low and sell high'. In other words, buy into market leaders when they are unpopular and relatively cheap. Problem: How do you really know if the 'stock' is on sale?
The price/sales ratio is a reliable indicator that a stock is sold at a discount. Go to yahoo.com and look for the P/S column (low numbers is good). Unpopular companies have a P/S of ##.25. Average company has P/S of ##.50. Popular companies has a ratio of greater than 1.
To get the highest growth on a long-term basis, purchase stock when p/s ratio is at ##.25 rising to 1.5. Research in various financial publications indicate that low P/S stocks tend to outperform the market.
Wisdom tip: don't apply this measurement tool on banks, real estate investment trusts, where sales are not the driving force.
Look for companies where managers are owners, too. Nepotism can be a danger in such situations, more often, though, owner-management is a plus. Owner-managers have a real incentive to keep company growing, as well as boost the stock's value. Look at yahoo.com (financials) for inside trading among management then go to company website to compare against longevity of management team.
While you may not find a stock with all the characteristics, insist on at least these two; it should be in a growth industry and with owner-management (proven success team over time).
Founder/Chairman of http://wwww.nomopofolks.com and online life coaching and financial education website.
However, when I got my first job, the HR counselor asked me how much would I like to invest in the 401K plan and how would l like to distribute it among mutual funds. I quickly said intelligently 'put it in cash' and let me go research my options. My research consisted of asking peers, parents and family members. As you can imagine, I got 10 different answers from 10 different people.
After reading several investment books, talking with investment professionals and reading the Wall Street Journal daily, I could not make a confident decision. Thank goodness for MONEY MAGAZINE, KIPLINGER and USATODAY. I could relate to people's success stories and the 'common sense' investment philosophies of financial gurus Warren Buffett and Jack Bogle.
For the small investor, picking common stocks is like throwing darts in a sports bar (hit or miss). Unless your research and develop a simple philosophy at home, you don't know what you might 'hit' that can 'devastate' your financial future in public.
Researching stock market history, one discover there a effective 'indicators' that improve ones chances to make money in the stock market. I would like to share some 'lessons learned' and discoveries that will help anyone make money in the stock market over a lifetime.
First and foremost, try to find and invest in Industry Leaders. Business Week and Fortune magazine publishes the Top Global Companies by industry ranking every year.
Make a list of all number 1 companies by industry in the magazines. Then type into Google 'growth industries in the world'. A Google search will provide you with multiple websites that lists the top 10 - 25 global growth industries. Match company and industry to this list of 'growth industries'. My dad once told me never put money on a 'donkey' that I did not think was going to win the race. Investing in a market leader in 'growth trends' positions one to make money in any economic environment, especially companies that offer products that people use everyday.
Evaluate and add small companies and technology firms to your list, if they offer a product that has a significant breakthrough that has a chance to dominate a growing market.
In 1935, a group of guys formed Lexington Corporate Leaders Investment Trust, which selected 30 corporate leaders (equal number of shares) in America for a stock portfolio.
Over the past 70 years, this investment criterion, has either matched or surpassed the S&P 500 index or Dow Jones Industrials Index. This classic buy and hold investment strategy works. The small investor should consider this approach, due to limited time to research stocks due to church, community and family obligations.
It is highly recommended to stick to stocks that have a price/earnings ratio that is lower than the Standard and Poor's index 500 or Dow Jones Industrial Index. Historically, lower the P/E ratio of the stock (4 -24) the higher the potential return. If the P/E ratio is greater than 25, the market maybe overpriced (overheated) and a meltdown is on the way.
To find this information, go to Google 'current S&P 500 p e ratio' and compare this number against your selected stocks. The P/E information for your selected stock can be seen on yahoo.com (financials) website.
Next, look for the dividend yield column, see if the dividend yield number is between 3-5 %. According to Ibbotson Associates, which track historical stock returns, during the 1930s -1980s, the return rate on stock investment was between 7 - 10 %. The high returns was due to 5% dividend yield in most companies, which was reinvested in blue chip (market leaders) growth stocks.
A wise tip that's given by most stock brokers is 'buy low and sell high'. In other words, buy into market leaders when they are unpopular and relatively cheap. Problem: How do you really know if the 'stock' is on sale?
The price/sales ratio is a reliable indicator that a stock is sold at a discount. Go to yahoo.com and look for the P/S column (low numbers is good). Unpopular companies have a P/S of ##.25. Average company has P/S of ##.50. Popular companies has a ratio of greater than 1.
To get the highest growth on a long-term basis, purchase stock when p/s ratio is at ##.25 rising to 1.5. Research in various financial publications indicate that low P/S stocks tend to outperform the market.
Wisdom tip: don't apply this measurement tool on banks, real estate investment trusts, where sales are not the driving force.
Look for companies where managers are owners, too. Nepotism can be a danger in such situations, more often, though, owner-management is a plus. Owner-managers have a real incentive to keep company growing, as well as boost the stock's value. Look at yahoo.com (financials) for inside trading among management then go to company website to compare against longevity of management team.
While you may not find a stock with all the characteristics, insist on at least these two; it should be in a growth industry and with owner-management (proven success team over time).
Founder/Chairman of http://wwww.nomopofolks.com and online life coaching and financial education website.
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