Pat McKeough has been making investing for beginners simple—and profitable—by helping investors make big gains for more than 25 years. His advice tobeginning investors is the same as it is for all investors: buy high-quality, mostly dividend paying stocks (or ETFs that hold these stocks) and evenly spread your investments over the five main economic sectors (Resources, Manufacturing, Finance, Utilities and Consumer). Pat also believes investors should avoid stocks in the broker/media limelight and focus on those with hidden or little-noticed assets.
In addition, Pat thinks then beginner investors should cultivate two important qualities: a healthy sense of skepticism and patience.
Investors should approach all investments with a healthy sense of skepticism. This can help keep you out of fraudulent stocks that masquerade as high-quality stocks. It will also keep you out of legally operated, but poorly managed, companies that promise more than they can possibly deliver.
If you are a new investor, you should also realize that losing patience can cause you to sell your best choices right before a big rise. All too often, investors buy a promising stock just as it enters a period of price stagnation. Even the best-performing stocks run into these unpredictable phases from time to time. They move mainly sideways in a wide range for months or years before their next big rise begins. (Stock brokers often refer to these stocks as “dead money.”)
If you lack patience, you run a big risk of selling your best choices in the midst of one of these phases, prior to the next big move upward. If you lose patience and sell, you are particularly likely to do so in the low end of the trading range, when stock prices have weakened and confidence in the stock has waned.
Here are some investment thoughts on snap judgments, the investors who make them and how they can hurt your portfolio.
Snap judgments can be a great time-saver, but they’re a poor tool for investment decision-making. Investment thoughts involving snap judgments often produce extreme, random results—good or bad. If you happen to make money with a series of snap judgments, it can turn into a habit. This may lead you to invest ever-larger sums of money this way, and that’s when your risk really rises.
After all, your random results will turn eventually from good to bad. That’s liable to happen just when random bad results can do the most damage to your finances.
NEW! The real secrets of successful investing
Successful investors have good habits. Investors who let their emotions rule can face tremendous losses. Pat McKeough’s new report “How to invest in stocks” shows you how to stay in control so that you can make the right decisions even in the worst markets.
The biggest problem with snap judgments: They’re based on short-sighted investment thoughts
The problem with snap judgments is that they deprive you of perspective. It’s better to base buy and sell decisions on a broad sample of the vast information that’s available on any investment. With snap judgments, you zero in on a tiny and unrepresentative sample such as an individual news item.
This news item may be an earnings report that beats the consensus forecast (the average earnings estimate from brokerage analysts). You may see this so-called “positive earnings surprise” as a sign that points to a lasting rise in earnings and the stock price—one that can go on for weeks, months, even years.
Of course, the stock’s rise may instead last for hours, minutes, or seconds—if it happens at all.
The funny thing is that earnings estimates are based on info supplied by the company. Some companies routinely try to manage brokerage-analyst expectations “downward.” That way analysts routinely underestimate their earnings. This can lead to a string of “positive earnings surprises”—earnings reports that beat the consensus.
This may give some investors the idea that the company is forging ahead much faster than expected.
In that case, the market may reward the company with a higher per-share price-to-earnings (P/E) ratio. It may trade for 22.0 times earnings instead of, say, 19.0 times. This can cut the company’s cost of financing. It can also make it cheaper to provide stock options to executives. But the fun can end abruptly.
For instance, suppose the company runs into unforeseeable earnings problems. This may lead to a “negative earnings surprise.” Earnings may come in far below the consensus, perhaps lower than recent quarters, and may even show a loss. This can spur selling by a lot of “snap-decision investors.”
Investment thoughts: Keep in mind that one-time gains can artificially inflate a company’s earnings and lower its P/E
Make sure you factor out low P/E’s that arise if a company records a large one-time gain, such as when it sells assets. One-time gains temporarily balloon earnings and shrink the P/E ratio, and are not representative of the company’s true ongoing earnings. Similarly, you should add back any one-time write-offs, so you don’t miss any stocks that have low P/E on an ongoing basis.
Final investment thoughts: snap judgments and the investors who make them
We’re focusing here on earnings reports as an example of a snap judgment because they can spur conservative investors to buy or sell. More aggressive investors may buy on much flimsier news items such as the launch of a new product line, the possibility of a big contract from a major (even unnamed) company, rumours of a takeover bid—anything can do it.
You can get lucky with snap judgments, just as you can with lotteries. But if you let snap-judgment investing become a habit, it will eventually cost you money. The flimsier the basis for your judgments, the more you’re likely to lose.
Better investment thoughts: Maintain a healthy sense of skepticism
If an investment sounds too good to be true, it probably isn’t true. Recognize, too, that some of your most promising investments will disappoint you, since no one can predict the future.
Remember, the investment business deals in intangibles and relies on trust, so it attracts more than its share of crackpots, dreamers and crooks. They have an uncanny ability to home in on trusting investors who accept dubious claims at face value. But if you follow a stock market investing strategy of diversifying and focusing your investments on well-established companies, your gains will offset your losses.
Have you made snap judgments in investing? What was the result?
While snap judgments may not be a good strategy in the long term, is there a snap judgment you’re sorry you didn’t follow through on?
Smart investors won’t ignore market order vs. limit order differences
When stock market trading, most investors place “market orders” or “limit orders.” However, which is the better form of order? It’s a decision many investors have to make each time they buy a stock.
RENAISSANCE GLOBAL HEALTH CARE FUND $44.77 (CWA Rating: Speculative) (Renaissance Investments, 1500 Robert Bourassa Blvd., Suite 800, Montreal, PQ. H3A 3S6. 1-800-268-8258; Web site: www.renaisanceinvestments.ca. Available from brokers) invests primarily in U.S. companies and global companies with U.S. operations or exposure to U.S. markets or… Read More
Tax shelters in Canada that can help you save money when you use them correctly
Tax shelters in Canada aim to reduce or eliminate your tax liability.
Tax shelters are legal investment vehicles that let investors pay less tax. Some are risky and should be avoided, like… Read More
Stock investment clubs can help new investors find quality stocks and help them develop their own investing style. But watch out for the drawbacks.
In 2017, learning about stocks is as easy as connecting to the Internet. But if you want to further your knowledge of investing,… Read More
Market timing theory attempts to interpret and detect buy and sell signals in trading patterns and history.
Political tensions in Washington following the 2016 U.S. elections have reignited interest in marketing timing theory. The practice of market timing consists of coming up with and acting on a.. Read More
Stock market volatility in 2016 spurred a rise in investor questions about capital gains tax. Given its own volatility, 2017’s bull run has spurred even more questions.
There are three forms of investment income in Canada: interest, dividends and capital gains. Each is taxed differently. Here’s a reminder of how… Read More
Financial, safety, and survival factors are important to consider while looking for stocks on the TSX index
The TSX is the abbreviated name for the Toronto Stock Exchange. You will often see our stock recommendations on TSI Network accompanied by a TSX symbol. When we’re looking… Read More
A: StorageVault Canada, $2.59, symbol SVI on the TSX Venture Exchange, (Shares outstanding: 300.0 million; Market cap: $774.0 million; www.storagevaultcanada.com), owns and operates storage locations in B.C. (10), Alberta (6), Saskatchewan (7), Manitoba (6), Ontario (20) and Quebec (7).
Its 56 facilities hold 26,449 units that… Read More
The importance of diversifying your holdings while sector investing, and why it’s a smart idea to avoid a sector rotation strategy
Your portfolio strategy should begin with one of the three key elements of our Successful Investor philosophy: Spread your money out across most if not… Read More
Use tax-loss selling to offset your taxable capital gains in Canada.
Tax-loss selling (or tax-loss harvesting) occurs when you deliberately sell a security at a loss in order to offset capital gains in Canada. You can then use these losses to offset your taxable capital gains.
Our investing recommendations are the same for TSX listings as they are on other stock exchanges—here’s how to choose wisely
To succeed as an investor, you need to be able to “cut through the noise”. That is, you need to sort through the news to… Read More
It doesn’t get as much play in the media as it did a decade ago, but even in 2017, online trading looks like a fairly quick and convenient way to build wealth. Still, there are many hidden dangers that aren’t always evident at first.
How do stocks work? It’s time to learn how stocks work so you boost your portfolio returns
Have you ever wondered, “How do stocks work?”
Stocks are financial instruments that let you hold an ownership stake in a publicly traded company. A stock you own gives you… Read More
Strategies for investing long term aren’t built by aiming to make a fast dollar, or profiting from inside information. They are built over time, and most importantly, by learning how not to repeat the market mistakes of the past.
Let’s take a look at some ways… Read More
Credit Card Identification Number
This number is recorded as an additional security precaution.
3-digit, non-embossed number printed on the signature panel on the back of the card immediately following the card account number.
3-digit, non-embossed number printed on the signature panel on the back of the card.
The privacy of the site/store visitor is very important to TSI Network, and is respected at all times. The information we receive from customers helps us to personalize and continually improve your online experience at TSI Network.
We do not collect or disclose personal information, except when it is provided to us voluntarily by the site/store visitor with their consent.
We store subscriber and password files containing personal information securely. These files are stored in secure areas that are not accessible to the general public. We are always working to ensure the security of your personal information.
What personal information do we collect?
The information we receive from customers helps us personalize and continually improve your online experience at TSI Network. TSI Network may collect personal information online for all legal purposes, which include, but are not limited to:
Information You Give Us: We receive and store any information you enter on our website or give us in any other way through sign-up forms or ordering forms for publications and services. You can choose not to provide certain information, but then you might not be able to take advantage of many of our services and features. We use the information that you provide for such purposes as responding to your requests, customizing your web browsing experience for you, improving our website, and communicating with you.
Automatic Information: We receive and store certain types of information whenever you interact with us. For example, like many websites, we use "cookies," and we obtain certain types of information when your web browser accesses TSI Network.
Information from Other Sources: For reasons such as improving personalization of our service (for example, providing better product recommendations or special offers that we think will interest you), we might receive information about you from other sources and add it to our account information. We also sometimes receive updated delivery and address information from our shippers or other sources so that we can correct our records and deliver your next purchase or communication more easily.
We do reserve the right, however, to collect and perform statistical analyses of the internet traffic to our website for our internal use. However, information collected does not allow us to identify any individual, and will not collect any personal information of the visitor. Furthermore, we do not sell, rent or loan to any outside parties the information collected and analyzed.
Although you may be able to access some of our websites without being required to register or provide personal information, certain websites and sections of our websites may require registration. In addition, if you choose to contact us to ask a question, we will collect your personal information so that we can respond to your question.
To make the visitor’s experience on our website easier, we may use per-session “cookies” (session identifiers) to track the state of the visitor session. This “cookie” is destroyed when your session with our website is over.
Cookies are alphanumeric identifiers that we transfer to your computer's hard drive through your web browser to enable our systems to recognize your browser and to provide features like "Remember Me" for our paying subscribers. Cookies are also used during the ordering process to help ensure your order is handled correctly. We do not extract any information about individual users or their computers as a part of this process.
The "Help" portion of the toolbar on most browsers will tell you how to prevent your browser from accepting new cookies, how to have the browser notify you when you receive a new cookie, or how to disable cookies altogether. However, cookies allow you to take full advantage of some of TSI Network's most useful features, and may be required to access certain areas of our website.
Internet Protocol (or IP) addresses are collected for all visitors to this site. This information is used for the purposes of traffic analysis.
Does TSI Network Use the Information It Receives?
"Contact Us" and Comment Features: TSI Network encourages visitors to its websites to contact us with questions and comments. Email addresses and other information of persons using these features may be collected in order to facilitate our responses to those inquiries.
Purchases of Merchandise: TSI Network websites may offer individuals the opportunity to purchase branded or other merchandise online. In connection with those purchases, customers may be asked to submit personal information, such as shipping addresses and credit card information, which is required to complete the transaction. TSI Network may also offer a Membership program, through which purchasers of its products may receive discounts on their online purchases. Membership registration may involve the submission of personal information to TSI Network and assignment of a user ID and password.
Agents: We employ other companies and individuals to perform functions on our behalf. Examples include fulfilling orders, delivering packages, sending postal mail and email, removing repetitive information from customer lists, analyzing data, providing marketing assistance, processing credit card payments and providing customer service. They have access to personal information needed to perform their functions, but may not use it for other purposes.
Promotional Offers: We may make our postal mailing list available to organizations offering products or services that might interest you. If you prefer NOT to receive these offers, please send an email with your name and address to email@example.com with "Do Not Rent Name" in the subject line. We do NOT make our email list available outside our organization.
Protection of TSI Network and Others: We release account and other personal information when we believe release is appropriate to comply with law; enforce the terms of the Legal notices that accompany this policy; or protect the rights, property or safety of TSI Network, our users or others. This includes exchanging information with other companies and organizations for fraud protection and credit risk reduction.
In addition to these limited disclosures of personal information, TSI Network may provide its affiliates or unaffiliated third parties with aggregate information about visitors to our sites. For example, we might disclose the median ages of visitors to our websites, or the numbers of visitors to our websites that come from different geographic areas. Such aggregate information will not include information of any individual visitors to our websites.
TSI Network may provide personal and other information to a purchaser or successor entity in connection with the sale of TSI Network, a subsidiary or line of business associated with TSI Network, or substantially all of the assets of TSI Network or one of its subsidiaries, affiliates or lines of business.
With Your Consent: Other than as set out above, you will receive notice when information about you might go to third parties, and you will have an opportunity to choose not to share the information.
Except as provided herein, TSI Network will not sell or rent personal information about you to unaffiliated third parties.
We may disclose personal information you have provided through our websites, for the above purposes, to persons or companies that we retain to carry out and other activities for which you have registered or in which you have otherwise asked to participate. In particular, we may for these purposes transfer information to any country (including the USA and other countries which may not offer the same level of data protection as Canada). We also will disclose personal information if required by law, including compliance with warrants, subpoenas or other legal processes.
TSI Network requires persons and companies to which it discloses personal information to restrict their use of such information to the purposes for which it has been provided by TSI Network, to adequately protect the information, and not to disclose that information to others. TSI Network cannot be responsible, however, for any damages caused by the failure of unaffiliated third parties to honour their privacy obligations to TSI Network. Similarly, TSI Network is not responsible for the privacy policies and practices of other websites that are linked to our websites.
We’re always happy to receive feedback, comments and ideas from TSI Network visitors, and we encourage you to add your perspective to any issue by leaving your comments on the site.
To make sure users get the most out of the site’s comments function, we’ve provided a few guidelines:
Do not post threatening, harassing, defamatory, or libelous material.
Do not intentionally make false or misleading statements.
Do not offer to sell or buy any product or service.
Do not post material that infringes copyright.
Do not post information that you know to be confidential or sensitive or otherwise in breach of the law.
TSI Network will not accept responsibility for information posted in the comments.
Please note that we reserve the right to delete or edit all comments. As well, we may close posts to further comments at our discretion. If a user repeatedly abuses our comment policy, we may also revoke that user’s access to our comments section.
By commenting on TSI Network, you agree that you retain all ownership rights in what you post on the site, and that you will relieve us from any and all liability that may result from those postings.
Special Note for Parents
TSI Network does not sell products for purchase by children. If you are under 18, you may use TSI Network's site only with involvement of a parent or guardian
How do we protect your personal information?
TSI Network does everything possible to prevent unauthorized intrusion to its websites and the alteration, acquisition or misuse of personal information by unauthorized persons. Notably passwords submitted by users of our websites are encrypted using encryption mechanisms. However, TSI Network cautions visitors to its websites that no network, including the Internet, is entirely secure. Accordingly, we cannot be responsible for loss, corruption or unauthorized acquisition of personal information provided to our websites, or for any damages resulting from such loss, corruption or unauthorized acquisition.
How do we maintain the integrity of your personal information?
TSI Network has procedures in place to keep your personal information accurate, complete and current for the purposes for which it is collected and used. You may review the information that you have provided to us and where appropriate you may request that it be corrected. If you wish to review your personal information please send a request to: firstname.lastname@example.org.
How do I withdraw my consent to use Personal Information? Access, Correction, Inquiries and Complaints
If you wish to request access to, or correction of, your personal information in our custody or control, or find out how we've used or disclosed that information, please make your request in writing to us. We may need to verify your identity before searching for or providing you with personal information. In some circumstances, we may not be able to provide access to your personal information, for example if it contains the personal information of other persons, if it constitutes confidential commercial information, or if it is protected by solicitor-client privilege. If we deny your request for access to, or refuse a request to correct, your personal information, we will advise you of the reasons for this refusal.
If you do not want to receive promotional offers, please notify TSI Network by sending an email to email@example.com.
The provision of information by you is entirely voluntary and you have the right not to provide information. Subject to applicable law, you may have the right to receive certain information as to whether or not personal information relating to you is held by TSI Network and to obtain a copy of such information that is sought. You may also have the right to require information, where appropriate, to be erased, blocked or made anonymous or to have data updated or corrected. If you do not wish TSI Network to hold information about you or if you wish to have access to information, modify information, or object to any processing of information or if you have questions please contact us.
What Choices Do I Have?
As discussed, you can always choose not to provide information even though it might be needed to make a purchase or to take advantage of TSI Network features.
You can add or update certain information as explained in the section "How Can I Change My Information?"
If you do not want to receive email or other mail from us, please notify TSI Network by sending an email to firstname.lastname@example.org.
Changes to this Policy
This Policy is the sole authorized statement of TSI Network's practices with respect to the collection of personal information through TSI Network's websites and the subsequent use and disclosure of such information. Any summaries of this Policy generated by third party software or otherwise (for example, in connection with the "Platform for Privacy Preferences" or "P3P") shall have no legal effect, are in no way binding upon TSI Network, shall not be relied upon in substitute for this Policy, and neither supersede nor modify this Policy.
TSI Network may revise this Policy from time to time.
Legal Notices and Disclaimers
The contents of this web site and our publications are based upon sources of information believed to be reliable, but no warranty or representation, expressed or implied, is given as to their accuracy or completeness. Any opinion reflects the Successful Investor’s judgment at the date of publication and neither the Successful Investor, nor any of its affiliated companies, nor any of their officers, directors or employees, accepts any responsibility in respect of the information or recommendations contained in the publications or on this web site. Moreover, the information or recommendations are subject to change without notice.
Information presented on this web site or contained in our publications is not an offer, nor a solicitation, to buy or sell any securities referred to on the web site or in the publications. The material is general information intended for recipients who understand the risks associated with an investment in any securities referred to in the publications or on this web site. The Successful Investor has made no determination regarding whether an investment, course of action, or associated risks are suitable for the recipient.
You are trying to access subscribers-only content. If you are already a subscriber, use the form below to log in.
Subscribers will have unlimited access to the magazine that helps people live more sustainable, self-reliant lives, with feature stories on tending the garden, managing the homestead, raising healthy livestock and more!
You are trying to access subscribers-only content. If you are already a subscriber, use the form below to log in.
Subscribers will have unlimited access to the magazine that helps the small-scale poultry enthusiast raise healthy, happy, productive flocks for eggs, meat or fun - from the countryside to the urban homestead!