Sound Advice

Stocks Are On Sale One can only gag at the ongoing silliness of those who attempt to make sense of the daily ups and downs of the stock market and where it might be headed.   Although there has been an increasing amount of attention being paid to interim volatility, that’s what short-term movements are all about.   From Day One of my career, when the Dow was hovering around 600 (Yes, only 600!) to where it is now, more than 50 times higher, there have always been periods when the numbers move all over the place, yet the bottom line is that the long-term trend is up. Given the built-in bumpiness, it’s essential to be aware that the prospective trajectory is one that’s likely over extended periods.   What happens today, tomorrow, next week, next month or next year is anybody’s guess.   And guess is the correct word.   No one knows and anyone who claims to know is a charlatan. Investors continue to obsess about the market pullback of the past year as if this ...

Options Explained The word Options is often viewed as a scary word by investors.   It has an aura of speculation and gambling, although a better description might include increased risk.   In many cases, that’s an accurate assessment, but there’s at least one situation where the use of options can help reduce risk. In plain English, an option is a contract between two parties that gives the buyer the right to buy or sell stocks at an agreed-upon price during an agreed-upon period.   An option to buy is a Call.   An option to sell is a Put.   There are a number of more complex variations. An investor interested in buying a Call expects that the underlying stock will rise above a specified level during a set period of time.   So if Stock A is currently selling at $50 a share and that investor thinks the stock will climb to $60 or higher within a year, one appropriate Call option might be an agreement that allows the investor to buy at a set price of $55...

Why Retirement Planning is Essential Retirement planning is an essential aspect of financial planning that helps individuals secure their financial future after they stop working. Although there are several aspects to retirement planning, investing is one of the most critical components that contribute to a successful retirement. A well-conceived program of investing helps individuals generate income, protect their capital, and manage risk effectively. In this essay, we will discuss why a well-conceived program of investing is an essential part of worthwhile retirement planning. First, investing helps individuals generate income in retirement. When an individual retires, he or she stops earning a regular income from a job or business. Thus, people need to generate income from accumulated assets to sustain their lifestyles in retirement. Investing in income-generating assets such as stocks, bonds, and real estate can provide a regular income stream that can help retirees meet thei...

Turnarounds Rarely Turn Around Although the majority of stocks that will prove to be profitable long-term holdings will gain ground on the basis of consistent improvement in their underlying profitability, there are always a few that are billed as promising turnaround situations.   Turnaround, in this context, typically refers to companies that may be undergoing major changes.   For some, the change may be a potentially lucrative new line of products.   For others, it may be a refocusing of efforts on an underserved market.   Or perhaps, a new management team boasting a successful record of breathing new life into firms that had been going nowhere fast. New ideas are indeed the fuel of future growth, but more often than not the enthusiasm for whatever innovations have come to light is of greater magnitude than what probably lies ahead.   In plain English, the biggest part of these deals is the hype surrounding them, which in most cases is not justified. ...

Underlying Earnings are the Engines That Power Stocks With all due respect to ongoing rumors about mergers in the works and remarkable new products such as  cell phones that will dramatically change the world, much of this is nothing more than talk of little value.  The key is a phrase voiced by John Houseman in a Smith Barney commercial back in the 1980s: “They make money the old-fashioned way.  They earn it.” Experienced advisors know that the best approach to successful investing is the ability to identify companies with sustainable above average growth run by seasoned management that consistently plans well for what it sees ahead.  Extraordinary breakthroughs are rare, but steady improvements of goods produced or services provided are not.  Those that lead in their respective industries set the standards and are often among those favored on Wall Street. You don’t need to be deeply engrossed in the machinations of analysis to understand how the process ...