buy stocks

When you are learning about investing, and preparing to invest more money in stocks, it’s a good idea keep a notebook about stocks you are thinking about buying. Even if you can’t buy, you can still commit yourself on paper. Of course, you’ll have to be scrupulously honest with yourself. (Best to write your journal in ink—not pencil!) If you keep this journal for two or three years, you should begin developing a sense of when to make buy and sell decisions—“when to pull the trigger”, as professional investors say. This can go a long way toward turning you into a successful investor. You’ll find that you have to learn to make these decisions while there is still some doubt in your mind. If you only buy stocks after all your doubt is gone and you’re sure you’re going to make lots of money, you will often wind up with small profits if not losses. This seems paradoxical to many non-investors, but it makes perfect sense....

Investors are often surprised when I tell them I see nothing inherently wrong with the basic concept of a hedge fund. In essence, hedge-fund managers are supposed to buy stocks they like, while simultaneously selling short in stocks they feel are unattractive. This aims to put their fund in a “market-neutral” position. By buying good stocks and shorting bad ones, you have hedged your stock market exposure. Theoretically, this means you make money regardless of which way the market moves. If the market goes up, all or most of the stocks you own or have shorted are likely to gain as well. However, if you have chosen your buys and short sales wisely, and diversified, the stocks you own are likely to gain more value in total than the stocks you’ve sold short. You are unlikely to make as much profit in a rising market as a so-called “long-only” investor (one who only bought stocks but didn’t do any shorting). But you are still likely to make money. If the market goes down, all or most of the stocks you own are likely to go down. But the stocks you’ve sold short are likely to fall more than your buys. That’s because bad stocks—those with high risk and/or little investment appeal—are particularly vulnerable to a big decline when the market as a whole is falling....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network....

Here’s the text of the quarterly letter I sent to our Portfolio Management clients in mid-March: “You can learn a lot about investing from studying the past. But you have to take a broad view, go back a long way, and examine a lot of past examples. History never quite repeats itself. But all too often, people fail to do in-depth studies. Instead they content themselves with “re-fighting the last war.” This is true of a number of investors and advisors today who are still getting over the last market plunge. Instead of trying to figure out what to do in today’s market, they are focusing on what they might have done differently in the mid-2000s, to have avoided the 2007-2009 market drop....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on a wide range of investing topics, including trading stocks online. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away. Tip of the week: “Online trading seems like an easy and convenient way to invest, but that can also make it an easy way to lose money.”...

From time to time, investors ask us questions to which there is not a simple yes-or-no answer. One of these is whether buying stocks “on margin” is a good idea. That is, should investors borrow money from their brokers to buy securities?

This strategy is reasonable in some circumstances, but it carries more than the usual amount of risk.

The main cost involved with buying on margin is the interest on the money you borrow. Plus, when you sell a security that you’ve bought on margin, you must first pay back the loan from your broker.

...

Dividends often don’t get the respect they deserve, especially from beginning investors. That’s because a dividend stock’s yearly 3% or 5% yield may not seem impressive alongside yearly capital gains of 10%, 20% or 30% or more. Yet dividends are far more reliable than capital gains. So with today’s low interest rates, investors are paying more attention to dividend yields (a company’s total annual dividends paid per share divided by the current stock price). That’s why the high dividend yield of a company like Bell Aliant stands out....

Investors sometimes ask what to do with an inheritance or any lump sum: buy stocks or pay off the home mortgage. From a purely financial perspective, it’s best to pay off the mortgage first then borrow money to buy stocks. That way, you are borrowing to invest, so you get to deduct your interest expense from your taxable income. With interest rates where they are today, this can expand the after-tax return on your initial investment by 2% a year compounded. That can give your long-term investment returns an enormous boost, and it’s theoretically risk-free. In practice, however, you need to take behavioural finance into account to weigh the risk....

Pat McKeough responds to many personal questions on investing in stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for the Inner Circle. Recently, an Inner Circle member asked about a company that has created a strong niche for itself in dental products. The company is growing internationally, and Pat assesses whether increased strength in Asia can offset slower growth in Europe. ...

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific stock trading advice that will help you develop a successful approach to investing. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away. Today’s tip: “Buying nothing but stocks that are going up in price is liable to lead to more losses than gains.”...