Whether you’re a seasoned trader or you’re just starting out, one of the best things you can do to improve your performance is to keep a trading journal.
Part of the reason picking winning stocks is so difficult is because a great company isn’t always a great investment. That may sound like a contradiction in terms, but when it comes to investing and all the complexities of modern markets, it’s also a very real potential outcome.
Wouldn’t it be great if there were a single piece of information that would tell you everything you need to know about whether to buy or sell a stock? Yup… that sure would be great. Unfortunately, it doesn’t exist. However, there is one number that does a surprisingly good job of conveying a lot of information about almost every stock. It’s a number that can be used in many ways: on a stand-alone basis for comparing one stock to another or to evaluate entire markets. It’s the price-to-earnings ratio, usually called the P/E ratio or the P/E multiple or simply the PE (with or without the “/”).
“There’s no such thing as a free lunch.” We’ve all been warned about this many times, in many different situations, and for good reason. Whatever is being offered “for free” almost always involves a hidden cost or fee or imposes a future obligation, monetary or otherwise. We don’t expect to get something for nothing and should maintain a healthy suspicion about anyone who tries to convince us otherwise.
Unless you’re a day trader, you shouldn’t micromanage your investments or even check them on a daily basis. But on the flip side, investing is not a hands-off endeavor, either.
As I write, the stock market is having more rise and falls than a ship in a storm. Since the January 2018 stock market high of 26,616.71, the Dow Jones has lost 10% in value. Almost $2 trillion in value has disappeared into thin air. Ouch! The decline officially puts us in correction territory.
Venture capital is that level of investment that typically takes place before a company goes public. It’s a high-stakes game, involving both risk of massive losses — including the entire investment — as well as generating incredible returns.
Back in 1952, long before everyone and their mother could discuss the benefits of adopting a holistic approach to their personal health, economist Harry Markowitz introduced theory recommending a holistic approach to one’s financial health. Known as Modern Portfolio Theory (MPT), it’s just as popular today as it was back in 1990, when it won Markowitz a Nobel Prize.
One day, you fire up Google Finance to check on your favorite investment. Maybe it’s Netflix (NFLX). You see that the share price is up $2 or down $10. Maybe even both within a one-hour period. Why is that? Who decided that? You did. Well, you and a few million other people, including me.
Uber… Spotify… Airbnb… These companies offer super-popular services and could make great investments for your portfolio. But there’s just one problem: They haven’t had their IPOs yet. In fact, the entire IPO calendar for 2017 is unusually bare. Why is this?