Making money in stocks

If you want to make money in stocks stop thinking about the short term and start concentrating on the long term. In the past 15 years of trading the only short term traders who i know who won money in the market trading short term were on the floor of the exchange. But intersetingly the most successful ones did not do as well as the best long term traders that i've known over the years.What was the secret that these long term traders had in common that made them big winners? Here goes;1) concentrate your holdings,in other words don't buy to many stocks 2)get to know every thing about the companies you are buying and make sure their the top companies in there industry 3)buy them when their out of favor.


Sound farfetched. Let me cite some examples;who could forget Philip Morris when it was at 18 and it's dividend yield was 11%.How about the property/casualty companies when they were out of favor about 1 year ago such as Progressive Corp,Allstsate,Old Republic.Who remembers the drug companies in 1994 when you could pick them up at single digit PE ratios and they proceeded to quintiple in 5 years.I could give other examples but i'm sure you get the point. When good quality companies are out of favor load up and hold them for the long term and you will join the small number of investors who make the big money.

I have been visiting 2+2 forums for some time now, but this is my first stop here


actually was rather surprised to see "Stock Market" listed at a gambling web site, but after a very brief reflection it seems entirely correct place.


but your post is not about gambling!!!!sounds like "investing". I could not prove it, but have a hunch that the market is mostly about gambling (most participants that is)


many of the dot-com EXmillionaires would not understand. they had quite a ride, but I'll go with you......

Jellow


Unfortunately, for many people the stock market is about gambling and of course their all losers in the market.The big winners take calculated risks with seasoned companies when their out of favor and hold on for the long haul. In that way they not only make money but they add a few percentage points to their returns by not paying capital gains taxes since they don't buy/sell all the time.


Trying to find the next Microsoft/Dell etc.. is like looking for a needle in a haystack. For every Microsoft/Dell there are literally hundreds of companies that were trying to do the same thing and they are all broke and so are the investors that bought their shares.


Remember when the market looks the bleakest is usually the best time to start buying. Don't believe me let me cite a couple of examples;The bank panic of the early 1990's every one said it was over for the banking industry, companies like Citicorp could have been picked up fo 10/share and went up tenfold in 10 years.PNC bank, Bank of Boston, First Chicago(which got taken over) all went up 5-10 times.Yet you couldn't find anyone who would even touch those companies yet they proved to be big winners.


People always insist on buying when things look great but unfortunately you pay a very high price for a cheerful consensus. Who could forget the recent debacle of the tech sector. Investors thought they were going to the moon and they got close but eventually sanity set in and they stumbled hard.Take a look at Lucent at one point it reached 84 it's now at 6 but investors were buying like crazy at 70 and up because the buying fed on itself. They couldn't get enough.Oh how we forget the lessons of the past.Interestingly,investors couldn't get enough of the tech sector when it was sky high yet now they have come down 60-90% nobody will touch them.Now is the time to start looking at the tech sector and see if there are some bargains among the ruble. I got a feeling 3-5 years from now were going to here i remember when i could have picked up Motorola for 16,Lucent at 6,etc.. but i couldn't do it because everyone was saying stay away. Oh how we need a cherry consensus to lay are money down but of course at a price. Lar

Larry, you may be right about lucent and motorola but I fear these because technological changes can be so devestating


I've tried to stay in things I understand-banks, oil, and yes Wal Mart(about 24 years now) etc, etc


generally have been more of a bottom feeder, and never take a really big hit - - it's easier to hold on when you get in low.


I like pot limit poker, I like to gamble, but not in the market, that's for keeps--not for fun.


enjoyed your posts,

larry, I agree with you in principle just that when you start preaching this on the pulpit is when it's least appropriate !!! What if we have a 5-10 year old bear market. I am 45, and 60% in cash. I may get upto 95% soon. So why not invest 100% 5-10 year from now and earn trasury, junk, corprate bond rate with real estate for the next 10 years ??? Yes hind sight is 20/20 !!!

Jack


I never predict the market or have any idea where it is going and neither does anybody else. The best market timers over any 10 year period don't even beat flipping a coin so why bother trying do something that is impossible over time.Having said that when there are stocks that look like good bargains you should pick them up and not be overly concerned where the market is going.Maybe it will go down as you say but maybe not who knows. Don't try to predict the unpredictable. Good companies picked up at bargain prices have always proven to return terrific results over time and thats a fact.


Look at the forest and don't get get caught up in the trees.Tremors in the stock market are a common occurence but the long term trend in the stock market is up if you don't beleive me take a look at a chart of the market going back to the 1920's and that should prove the point.


Buying real estate is an excellent way to invest provided you strive to keep your eye on the long term and buy quality at a fair price.Sound familar? same principles hold to buying stock as real estate. Good Luck. Lar

See, the old "mantra" - some timers actually most are better off that a buy and hold person who is a small investor. I am darn sure of this. Wall Street is using the "mushroom" miss-information for years "feed them bullshit and keep them in dark" Show me some stats and I will show you ten to refute it. It all depends on how you look at it. If you are a buy and hold type (basic brainless investor) for technology you have dead money for at least 5 years.

Intereting post. Unforunately,buying quality companies when their out of favor is not brainless investing.Trying to find good companies to buy at the right prices takes a lot of work at least it has for me. You can refute what i say? Really lets hear what you got. Let me name some of the people i'm talking about then you name yours. Warren Buffet,Bill Ruane, John Templeton, John Neff, Peter Lynch, J Paul Getty,the Tisch brothers,Fayez Sarofim,Shelby Davis,need i go on? If you like their are many more . They don't all follow the exact same strategy but they have all made and kept their money.Some of these names are the wealthiest people in the country.


The tech sector is one area to look at there are more.Now lets see your list of short term traders that are making big money and keeping it.Since you have 10 for my every one i can't wait.Interestingly,i don't see anyone on the Forbes 400 of the wealthiest individuals that are short term traders not one!Hmm i wonder if that means something.Well genius lets hear what you got. Lar

The richest 1% of the US has maybe 20% of their wealth in common stocks. Yes you can buy and hold this way. They ouwn private shares, preferred stocks, private holdings.... If you noticed I was referring of the average "joe" who has most of his 401K, IRA, etc. Timers are a 'class' by themselves and some a very succesfull. You were doing a little name dropping of famous investors - I doubt that it has any bearing on the topic at hand. Pro timers outperform the SP it's the dumb fund managers (who by the way buy and hold) who are underperforming the SP year after year. Timers use index funds and sectors - even the dumb fund managers can't screw up a sector fund too much. But if you have your ways set who am I to sway you. Buy on this dip and hold (but not too long ;)

This is not accurate. All but a few of the people you mentioned at one time or another either 1) Raised cash/bonds because of market conditions or 2) Rotated out of certain sectors because they were "overvalued".


Let me say this...."market timing" is the only way you are going to outperform the market without getting lucky. Of course you run the risk of lagging an index fund...that's why it's called risk. "Buying quality companies when they are out of favor" is market timing. What do you have in your portfolio when there is nothing of "value?" Cash/bonds/real estate....hence you are market timing. People are ridiculous who rail against market timing but don't even realize they are doing it.


If you are using screening techniques that every other value investor uses to choose your portfolio you might as well buy a bundle of index funds. You will end up in the same place in 20 years and have less volatility. Unless you are using some technique the big players in the financial world don't know about you can forget about expecting a positive spread vs. the market.

John


There's some truth in what you say,however, there are also some big mistakes.Lets take an example;Warren Buffett bought Coca-Cola share in 1988 when he saw that their international sales were exploding internationally he bought more shares in 1992 and still holds all those shares today. He has owned those shares for 13 years through thick and thin. Recently Coca-cloa shares have not done well yet he still owns the shares why? Shouldn't he sell all those shares since there were times when Cokes shares were overvalued even according to him.He did not do it because he bought a great company at a great price and has held on through all those ups and downs in the market because those temporary tremors come and go in the market. He has made a lot of money on Coke somewhere in the neighborhood of 15-20% compounded and paid no taxes.


You say market timing is the only way to go well i think we have a different definition of market timers.Joe Granville is a market timer,Richard Ney is and i could list many more and their results have been terrible.However,in a way the guy that buys seasoned companies when their out of favor are sort of market timers yet they are not tryng to predict where the market is going.Let me give another example;last year if you would have been a market timer you would have said stay out of stocks because the market is going down and you would have been 100%correct. Yet the investor that bought the property/casualty companies has doubled his money in the same period that the market went down and would have missed a big move.Instead the investor who focused on buying quality companies when their out of favor and let the market take care of itself would have proved again the benefits of this approach.


People constantly try to take a simple approach and make it complicated.I've given many examples and backed what i have said. Yet i have no examples from the people who have responded. Show me the market timers that have made money and kept it.I hear talk but i see no facts.Lar

most of them are called hedge funds and the best have outperformed the SP in most years. Some years the return was 100% or like it. Do some research of the best hedge funds and you will see it for yourself. I have no interest proving anything to you. They all timers. Some went even short of the naz 2 years ago. Some just a few weeks back. They are making out better today than you I suppose. The timne frame is quite consistent some go back ten years. Buffet had years when his returns were crap too. 20-30% per annum. Timers can make 1% a week.

Hmmm...you didn't get it. Oh well.

http://cbs.marketwatch.com/news/story.asp?guid=%7BF2FC1DBA%2DF724%2D4529%2D8AB8%2D 17A8409F8F7D%7D&siteid=mktw


This guy is not the brightest of the bunch. This article is fun

and interesting. Some of the worst Mutual Funds for the ten

years. Mutual Funds are the worst timers. I should rephrase

the worst Mutual Funds don't do timing. Some do. Some of course

are just indexes BECUSE they realized you can just buy and hold.

Most investors in these funds I think are braindead for years or really dead. /images/wink.gif

The author is a fool. The top performing large growth funds are in tech and the bottom ones are Japan. Of course....it doesn't mean anything in the future. If this guy thinks Japan is going to have negative performance over the next 10 years he is on crack.

As usual i see no facts just talk.In regards to hedge funds there are a couple that have done well namely,Julian Robertsons tiger fund and George Soros'fund. But they are few in number and probably way beyond the average investors abiltiy.Your comments that they are doing better than me well if they are making 100%'year they sure are.However,i'll make a little wager that they won't keep those results up over the long haul.I shoot for 15-20%/year which will allow me to double my money every 3.5-5 years. I really don't care how i do in any single year since bad years are part of investing and i concentrate my holdings so that is to be expected.


Keep concentrating on the short term and thinking you can keep it up over the long haul and you have become the fool.I keep asking for facts and keep getting smoke so it is quite apparent you have nothing to back it up but hot air. As an aside one of the great hedge fund managers in the last 10 years was Michael Steinhardt but he closed his fund due to poor results.Unfortunately you guys don't get it but hopefully some people who have read the posts will and will become part of the small percentage of investors that make the big money and keep it.Good luck to all. Lar