Sound Advice

How To Forecast Future Stock Prices . . . Usually Wall Street research can be extraordinarily useful in helping to gain a better understanding of the inner workings of companies.   Having been on the research side of the investment world for many years, I've had extensive experience in exploring the nuts and bolts of dozens of companies, both through analysis of numerous financial reports and regular contact with corporate executives.   Some of it was useful; some was not.   In all cases, the goal was to come up with estimates of where company earnings were likely to be in the year ahead and the years beyond. As analysts, we looked for consistency of progress and the potential to grow at above average rates.   The task of coming up with these kinds of conclusions was a matter of translating discussions of ongoing operations and developments into numbers that made sense. Once that was done, we viewed the current analysis against the backdrop of the past.   The range of p

10 Things Investors Need To Know Market forecasts are totally meaningless.   There are numerous seers in the media who with great seriousness provide definitive thoughts about where the market is going tomorrow, next week, next month or next year.    What's important to understand is that short-term market movements are heavily influenced by changes in investor psychology, which are unknowable.   And for that matter, please ignore pronouncements from so-called technical analysts who attempt to divine the future from recent price patterns.   That is what the Brits call rubbish.   The rewards of real fundamental analysis (profitability and financial health) are reflected in changing market prices over long periods of time, i.e., market cycles of three to five years or more, not in the next few weeks. Target prices are nonsense.   Take a look at Yahoo! Finance, enter a ticker symbol, and up comes information about the stock in question, including a target price.   At bes

"A goal without a plan is just a wish" Antoine de Saint-Exupery Planning for one's financial future is a straightforward exercise, but one in which the nuances can dramatically change the outcome.  When you start on the path ahead, you have the option to change direction as you move along toward your goal.  If you don't start, as is the case more often than not, you have no options other than struggling to deal with unforeseen consequences, which may well be less than desirable. A financial plan has four main elements: what you own (your assets), what you owe (your debts), how much you are earning (your income), and how much you are spending (your expenses).  If your assets are greater than your debts and your income over time exceeds your expenses, assuming nothing untoward happens, you're probably in good shape. But a plan is based upon assumptions that may or may not be on target.  Among these are the rate of inflation, the rate of investment ret

"If you cannot control your emotions, you cannot control your money." Warren Buffett As much as all of us would like to believe we can always make rational decisions about our finances, the reality is otherwise.  When our personal situations are promising and the business climate is favorable, we readily respond to questions about risk tolerance and affirm our ability to deal with bumps in the road ahead.  Yet during times of extreme volatility, such as we experienced in late Spring, our rational selves are frequently overwhelmed by our emotional selves. When this year's roller coaster was headed for its steepest drop, few of us were able to keep cool heads and accept the reality that the plunge was not signaling the end of the world. There have been many plunges in the past and there will be more ahead.  In only a few weeks, this latest drop approximated the extent of the pullback from late 2008 to March 9, 2009, which took place during the banking crisis.