As usual, I agree with Stephen's advice, but up to a point. There are some
people to listen to, but they aren't the ones on television. You have to go
to the library, or other less commercial sources. And their (useful) advice
does not include picks or predictions. Here are a few more suggestions I
can offer after many years of watching the market.
1) Believe in the efficient market, even though it is very hard
psychologically to act on that belief (here is the psychology part). From
this it follows that nobody can give you any advice about individual stocks,
sectors, or timing. This is especially true about everyone in the media, TV
especially. Consider them all to be salesmen or fools. They have to say
anything to fill air time. This includes Rukeyser. An exception: the
material produced by Vanguard. It is remarkably sound and free of hype.
2) Then --Diversify. Asset allocation is the key to investing. A
standard, and excellent, book on this:
Gibson, R. C. Asset allocation. this is available on Amazon.
3) Stay the course. Avoid fads. (such as "this is a new economy,"
Elliot wave, etc.) The laws of nature do not change.
4) Use time to your advantage. Start investing when you are young, and
you can retire comfortably. Read "The millionaire next door."
good luck
don
Donald McBurney
Stephen Black wrote:
> On Sat, 12 Jan 2002, Richard Pisacreta, Ph.D. wrote:
>
> >
> > Any of you Tipsters study the stock market? Can you off the
> > rest of us any advice for next year to offset the terrible
> > returns of the last two years? Any of you in TIAA-CREFT
> > pension plans have any advice on how to distribute future
> > allocations?
>
> Perhaps we can justify this question on TIPS by suggesting it
> raises an important psychological question. This is why people
> allow themselves to be guided by experts who have no expertise. I
> speak of brokers and "financial advisors". If no one goes for
> this, I say, what the heck, it's a slow week-end on TIPS, and
> it's a fun question.
>
> My understanding is that the stock market is "efficient", which
> means that the price of a stock fairly represents all information
> available about the company and its prospects. Consequently,
> there are no bargains and no dogs. Aside from degree of risk, it
> doesn't matter which stock you choose. Forget analysis. I did a
> web search to confirm the above, and came up with an apparently
> authoritative analysis of the efficient market hypothesis at
> http://www.investorhome.com/emh.htm. Bottom line:
>
> "If markets are efficient and current prices fully reflect all
> information, then buying and selling securities in an attempt to
> outperform the market will effectively be a game of chance rather
> than skill."
>
> and
>
> "Many novice investors are surprised to learn that a tremendous
> amount of evidence supports the efficient market hypothesis"
>
> Corollaries:
>
> 1) A monkey throwing darts at a page of stock listings will, on
> average, do just as well as the finest financial advisors money
> can buy. In fact, the Wall Street Journal runs such a contest
> yearly (using reporters rather than monkeys, about the same
> thing), This year, the dart method outperformed the experts (see
> http://www.onegroup.com/ReadingRoom/stockpick.asp)
>
> 2) Never listen to a broker's recommendation. As they have no
> more ability to predict stock movement than anyone else, their
> recommendations will be based on how your choice can earn them
> the most money. Brokers are always conflicted. Consider why they
> prefer to earn commissions off you rather than putting their
> alleged expertise to work on their own behalf.
>
> 3) With the exception of the above, never listen to
> anyone's advice on the stock market. They know as much as you,
> which is to say, nothing.
>
> 4) Since stock-picking is futile, choose stocks that are fun to
> hold. I like high-tech genetics companies. Not only is the
> science amazing, but the potential health benefits are
> staggering. The fact that they're all money-losing and likely to
> go bankrupt should only be mildly discouraging.
>
> -Stephen
> ------------------------------------------------------------------------
> Stephen Black, Ph.D. tel: (819) 822-9600 ext 2470
> Department of Psychology fax: (819) 822-9661
> Bishop's University e-mail: [EMAIL PROTECTED]
> Lennoxville, QC
> J1M 1Z7
> Canada Department web page at http://www.ubishops.ca/ccc/div/soc/psy
> Check out TIPS listserv for teachers of psychology at:
> http://www.frostburg.edu/dept/psyc/southerly/tips/
> ------------------------------------------------------------------------
>
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