Tuesday, October 27, 2009

State of Our World: Open_Notes 16

when interest rates go down, money becomes cheaper and stocks become attractive -- stock price is mostly disconnected from actual company value in the short-term; companies benefit only if they wish to sell more stock when prices are high for capital inflow -- 70-80% of daily volume is institutional trading; earnings growth over the long term drive stock prices; earnings have increased 56-fold in the past 50 years [on avg. earned 11% annually: S&P500], the market has increased 58-fold; stock prices fluctuate in the short-term -- rules-of-thumb are arbitrary; there are many strategies to buying-selling; long-term or short-term profit taking -- the stock market is almost purely emotion for many [the emmonic (emotion/money)] vs. studying companies [most companies get through difficulties; most take time to develop] - your *relationship* to stocks needs consideration; a long-term net-buyer of stocks [long-term holdings] perspective survives fluctuations, buying when prices are low; gradually you pull back from stock investments approaching retirement [time-frame, goals, differ for each individual] to avoid being forced to cash-in when prices are low -- short-term perspectives, the mentality, causes volatility in the market [day-traders; short-term profit taking; the gamble; options trading, etc.].

information, studying is most important - SEC rule changes [Fair Disclosure] has made investment information open to all [sorting insight from the noise is the trick, the skill needed, the *discernment*] -- "greedy" or "clever" is the question !! -- direct stock purchase plans [dividend reinvestment] is the best for minimum investments, ie., 100$ per month, etc., look for no fee, no load funds; take a long-term perspective, benefits compounding over time building on the strength of US companies, ie., index funds [broad diversification; low-cost, average 1.6 basis-points, as opposed to 20 basis-points for some investment strategies] - long-term stock appreciation depends on corporate profits. -- [NPR, All Things Considered, "The Financial Markets", interview The Motley Fool, Jan.03.01, with [inserts]]

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