With the stock market DOW Industrials Index approaching 7,000, banking institutions failing, and almost all technical indicators screaming recession, is it time to think about putting new money into the stock market? The time just might be closer than you think.
Most people are familiar with mutual funds that come in a vast array of styles and types. Some hold stocks, some bonds, some aggressive and others conservative, with others offering a combination of both. Generally, mutual funds are intended to be held for the long term—five plus years. In the books titled Charles Schwab's Guide to Financial Independence and Ric Edelman's The Lies About Money, there are pie charts with asset allocations grouped ranging from aggressive to conservative to assist people in determining how to allocate their monies. With thousands of mutual funds available, which and how do you pick? See the list of publications at the end of this article.
A relatively new group of ways of investing are ETFs (Exchange-Traded Funds). They look like mutual funds but generally cost 1/2 to 2/3 less than mutual funds. TV personality Ric Edelman in his The Lies About Money, has a brief chapter devoted to ETFs. As of this writing there are about 700 ETFs, many index-based while others are very industry specific, i.e. steel, agriculture, finance, etc., or region/country specific, i.e. Spain, Middle East or Emerging Markets, China, etc. So, which do you pick? Again, see the list of publications at the end of this article.
Last comes the individual company stocks. You can use various publications, such as Kiplinger's or Money magazine, etc. to assist you in your picks which might be the best way to start out before you begin picking your own. It is believed by many that individuals who learn to invest in stocks will out perform holders of mutual funds. But making your own picks requires much more study as to the fine points and intricacies than required in mutual fund assessment.
There are basically two schools of thought about evaluating stocks: Fundamental Analysis and Technical Analysis. Most professional analysts use both. Fundamental analysis is well covered (no joking) in Jim Cramer's Real Money: Sane Investing in an Insane World. It is an easy-to-read and comprehend book. Do not judge this book by his Mad Money TV program. He has you research stocks, and almost all information can be found using www.yahoo.com under the Finance grouping.
Technical Analysis on the surface appears much easier than Fundamental Analysis. By evaluating the "chart patterns" of a stock over different time frames, you will see buy and sell signals. The book Stikky Stock Charts reveals several major chart patterns with their uses. Going to Technical Analysis Education at www.trending123.com, you will see a much longer list of charts, illustrating Technical Analysis is not as simple as one might be lead to believe.
Within the library itself there are over one hundred titles about investment analysis/management, financial planning, stocks, bonds and mutual funds. Some books of interest include:
How to Make Money in Stocks: A Winning System in Good Times or Bad by William J. O'Neil
Jim Cramer's Real Money: Sane Investing in an Insane World
The Lies about Money: Achieving Financial Security and True Wealth by Avoiding the Lies Others Tell Us—And the Lies We Tell Ourselves by Ric Edelman
Mutual Funds for Dummies by Eric Tyson
The Only Three Questions That Count: Investing by Knowing What Others Don't by Kenneth Fisher
Rule #1: The Simple Strategy for Sucessful Investing in Only 15 Minutes a Week by Phil Town
Stikky Stock Charts from Lawrence Holt Books
Use the News: How to Separate the Noise from the Investment Nuggets and Make Money in Any Economy by Maria Bartiromo
Some periodicals in the library with good information on investing in stocks, mutual funds, bonds and ETFs:
Barron's National Business Weekly
Investor's Business Daily Newspaper
Kiplinger's Personal Finance Magazine
Morningstar Mutual Funds
Value Line Stock Ratings & Reports
Value Line Stock Ratings & Reports (Expanded Edition)
Wall Street Journal
Some Web Resources: