Hardly a new activity, but the very public and almost nonchalant disclosures rather have the markets buzzing today. It seems a bit sad to have to say that the most regulated, transparent market in the world is a bit of a "scam," albeit a legal one. I've read that the top 5 brokerages (Goldman Sachs. Morgan Stanley, Merrill Lynch, et al) now account for more than 75% of the market activity. It is easy to control stock proces when the mere act of buying will raise the price.
It's not a scam, but the stock market holds many risks, most of which are public knowledge.
My boy, that's why there are no-load index funds. Funds that mirror the S&P 500, or the Russell 2000, or other commonly used indexes.
That's why you diversify your portfolio, growth and value, large cap, mid cap and small cap, domestic, global, international (and yes there is a difference between global and international), real estate (there are real estate mutual funds that invest in REITs and UITs) and even a tast of commodities (again there are even mutual funds for that - commodities, precious metals and such).
And, ideally, you also have money set aside for pure speculative plays. Not part of your portfolio, but a side pool of money that if you lost it, it would be no big deal.
Exactly. I'm a firm believer in long term investing, and no load index funds are fantastic in the long term. I hold several. Speak to someone who makes a living at investing to help you, preferably someone who has been financially successful.
disclaimer: I am in no way in a position to offer professional financial advice. Take all of this with a grain of salt.
An investor in stocks needs to realize that yes, price swings occur when large investment companies add to or remove from their holdings. This isn't a scam, but an investor needs to realize all macroeconomic factors when purchasing an investment. This takes a huge amount of time doing research, and hopefully a carefully calculated risk. As the good Capt. says, diversification is your friend, it's not a buzzword, it's necessary.
When looking at speculative stock purchases, I don't bet all my savings on them, and I bear in mind what the institutional investors are likely to do and how it will swing the markets.
Rules:
1. Diversify. Fraud happens, as do other calamities.
2. Don't follow stock tips. Do your own research.
3. Great returns require great risk, there's no free lunch. Great risk does not necessarily insure great returns.
4. You can become modestly wealthy by long term investing, but you must diligently invest. Be wary of get rich quick schemes.
6. Know your risk tolerance, and know your goals. I want to retire in comfort, that is all. I have a friend my age who borrowed a great deal to buy a stock he thought was going to perform well and it did. It gave him a small fortune to work with, but would not be something I would do or recommend to anyone. He could have just as easily lost all his money and owed.
7. Finally, in relation to point 6, if you can't sleep at night you are assuming too much risk.
In terms of financial planning I do the following, but keep in mind everyone's situation is different:
1. I won't borrow money to purchase things that aren't likely to appreciate in value. If I don't want to pay up front for something, I don't buy it.
2. Pay off your credit cards, and pay the full balance every month. I only use my credit cars for things like car rentals and hotel rooms, and other expenses like that.
3. Make a will. Talk to your spouse, hire a lawyer, and just do it. You don't know when you are going to die.
4. Hire a good professional accountant.
I've kind of wandered off the original topic, but I find when people start talking about investing they often have other financial holes in their life they need to patch as well.