In addition, Pat thinks then beginner investors should cultivate two important qualities: a healthy sense of skepticism and patience.
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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.
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If you’re like most investors, you should invest the major portion of your money in stocks from our Conservative Growth Portfolio. But you may want to add some stocks from our Aggressive Growth Portfolio, which we update in this issue.
For example, in 2015, the company—then focused on equipment—decided to shift to providing network software. The move reduced Cisco’s dependence on hardware sales, which tend to be cyclical. Another key shift for the company was its decision to sell its software as a recurring subscription rather than as a one-time purchase. That has further stabilized its revenue stream.
Now, the company is in the middle of another transition, as it incorporates artificial intelligence (AI) tools into its products. This particular shift lets Cisco’s clients process increasingly large amounts of data to prevent costly cyber incidents.
ETFs trade on stock exchanges, just like stocks.
Private REITs tout that lack of transparency as a benefit—since it avoids the volatility and speculation of public markets.
On the other hand, staying private also cuts the likelihood that nosy outsiders and analysts will find out about and draw attention to hidden risks and problems that the REITs happen to suffer from.