As the bull market in stocks ages, US investors are rolling over their investments from a focus on growth to a focus on value. They are also looking offshore for foreign investment opportunities. Some choose to combine the two approaches, but how do you find value investments offshore? CNBC reports that Morgan Stanley is looking offshore for value and where to put your money for the next year and they specifically suggest Brazil, Thailand, Indonesia, India, Peru, and Poland. Underpinning the bank’s preference for stocks in emerging markets is an expected stabilization in growth in those economies in 2019, while expansion in the U.S. is expected to slow. The projected turnaround for emerging markets is one reason why the investment bank prefers stocks in those economies over that of the U.S. next year. Morgan Stanley said it upgraded emerging market stocks from “underweight” to “overweight” for 2019, while U.S. equities were downgraded to “underweight.” So, if you too think that the US bull market has largely run its course and that the emerging market bear market has likewise stopped going down, why aren’t you investing offshore? How to Find Value Investments Offshore: American Depositary Receipts Unless you have specific knowledge and experience in foreign markets and with foreign investments, you may not know where to start. And, for that matter, you may not have the time to evaluate specific...Read More
The US stock market is entering a correction mode. There is a lot of speculation about whether this is a short-term buying opportunity or a longer term meltdown that will wipe out years of gains. Ideally, investors should use fundamental analysis of intrinsic stock value and technical analysis trading signals as guides, to buying and selling stocks, bonds, real estate and other investment vehicles. But, human nature being what it is, we invest more aggressively when the market goes up and pull back faster when the market goes down. A part of what is going on today is a reverse wealth effect. Here are some thoughts about this phenomenon and how the reverse wealth effect will change your investing and your investments. The (Reverse) Wealth Effect Investopedia defines and explains the wealth effect. The wealth effect is a theory suggesting that when the value of equity portfolios are on the rise because of accelerating stock prices, individuals feel more comfortable and confident about their wealth, which will cause them to spend more. In 1968, for instance, economists were mystified when a 10 percent tax hike failed to put the brakes on consumer spending. Later, the sustained spending was credited to the wealth effect. Even though disposable income declined because of the additional tax burden, wealth continued to grow because the stock market persistently climbed higher. The wealth effect was...Read More
According to a recent article in Market Watch the folks who have buying up stocks faster than anyone else in the last thirty years are those making family incomes of $42,000 a year. Why is that? What’s changed since 1989? Access did. Specifically, access to workplace retirement savings plans, like 401(k)s, and personal investment accounts, like IRAs. Individual retirement plans in the USA hold about $9 Trillion and 401(k)’s hold about $5 Trillion. The entire US stock market has a capitalization of about $30 Trillion. And, since so many of us now have these tax-deferred vehicles, how should you invest your retirement accounts? Long Term and Smart Investing for Retirement Invest for the Long Term The key to investing your 401(k) or IRA is to remember that the money will be for retirement. By waiting until retirement to take any money out of these vehicles, you will likely pay less in taxes because your income will be less than during your working years. And, of course, any capital gains will be long term because many of your investments will be ones that you have held for years. Use Intrinsic Value as a Guide for Investments Since you will be picking investments that you may well stay with for decades, we suggest that you take a couple of clues from perhaps the best long term investor, Warren Buffett. Buffett invests...Read More
Making smart investing choices is the key to making a profit and avoiding losses. But, how do you make smart choices? What analysts do you listen to and when do you follow the herd versus being a contrarian? There are signals that seem to occur in every market situation. But, why do signals help you make smart investing choices? Avoiding the Twin Demons of Fear and Greed When the value of an investment, like a stock, is going up, it is easy to become greedy. And, when the value of that investment starts to fall, it is easier to become fearful. These traits are not limited to you, Ms. or Mr. Investor. They tend to be shared by the majority of investors. Successful long term investors have gone through many business cycles and have come to recognize some basic signals. None other than Warren Buffett has advised investors to be fearful when others are greedy as noted in an article by Investopedia. Warren Buffett once said that as an investor, it is wise to be “Fearful when others are greedy and greedy when others are fearful.” This statement is somewhat of a contrarian view on stock markets and relates directly to the price of an asset: when others are greedy, prices typically boil over, and one should be cautious lest they overpay for an asset that subsequently leads to...Read More
The US stock market is down a bit as investors are flocking to quality stocks, as reported by CNBC. What is going on? Why is there a flight to quality investments? Both before the market’s October sell-off and in the two-week bounce, investors have shown a clear preference for “quality” stocks. Not the same as cheap “value” stocks, these are companies with less debt, stable businesses and some defensive characteristics in a tougher market or economy. A grouping of such companies by Citi surfaced the likes of Walmart, McDonald’s, Pfizer, Procter & Gamble, Amgen and Quest Diagnostics. While not predictive in itself, this pattern is one seen in the run-up to a bear market. So, what is a quality stock? CNBC notes this. Quality has no single, strict definition. But the common traits are a sturdy business not reliant on a strong economy; high and resilient profitability; and a strong balance sheet unburdened by much debt. The point is that many investors are hedging their investment risk as the bull market gets older and older, the trade war does not appear to be going away, and a House of Representatives controlled by Democrats may be a thorn in the side of the Trump administration. Does a Quality Investment Need to Be a Stock? An investment that is highly likely or even guaranteed to make a profit and is very...Read More
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