|
In this day and age, market volatility is increasing, the market is
more unpredictable than ever, and equity appreciation is occurring
predominately in narrow market segments. There is talk of the old versus
new economy, and advances in the technology sector appear to be
increasing at a rate that makes the average investor feel overwhelmed.
The only way to overcome this feeling is to try to better understand how
the market works. How? By transforming into a New Age Investor.
I would
like to start out by defining the "New Age Investor." For
purposes of this investment column, the New Age Investor is a person
that actively and aggressively monitors their portfolio and market
conditions. The New Age Investor focuses on investing in growth stocks
and continually upgrading their portfolio based on the market conditions,
as new and more profitable stocks are identified. The New Age Investor
is always looking for news and information to keep a pulse on the
market. The New Age Investor aggressively researches stocks and performs
technical analyses to minimize investment risk. Above all, the New Age
Investor uses a combination of investment strategies to increase
portfolio appreciation. I will begin by trying to focus on some of the
key tools and strategies used by the New Age Investor.
It takes money to
make money. True, but as an investor you need to adopt a strategy to be
successful. At the root of this strategy should be gaining information,
information, information. Without information, you the investor are ill
prepared and not likely to be successful. Fortunately, today we have the
Internet and information is at our fingertips. One source of information
is your investment brokerage firm. For example, TDWaterhouse provides
free real-time quotes, research (e.g., Zachs and S&P Reports), and
advanced charts to monitor and compare the performance of one stock
against another or an industry. In addition, there are several free
Internet sites that contain valuable information. These include www.quicken.com,
www.morningstar.com, www.moneycentral.msn.com,
www.personalweath.com, www.thestreet.com,
www.forbes.com, www.fool.com,
www.cnbc.com, www.cnnfn.com,
www.zdii.com, www.clearstation.com,
www.siliconinvestor.com and
www.flextrader.com, to name but a few.
Moneycentral.msn.com, quicken.com, and flextrader.com provide some of
the most in-depth free information available to the New Age Investor.
This information keeps the New Age Investor informed and allows them to
actively monitor market conditions.
Now that we have located some
valuable sources of information to keep you informed, you might be
wondering what information is needed to become a successful New Age
Investor. First and foremost is obtaining knowledge on the industries
that are experiencing or are expected to experience super/hyper growth.
Simply put, you want to invest in equities where revenues are growing or
will be growing in the near future by at least 30 to 40 percent per year.
Invest in stocks that aggressively increase market share through new
products, technology advancements, acquisitions, and mergers.
The New Age Investor searches for, and invests in, stocks that consistently
meet and beat market expectations. They fluctuate cash reserves by
taking profits when stocks are at a premium so they can take advantage
of market corrections. If a stock moves significantly lower after they
make a purchase, they will add to their position as long as the
fundamentals of the stock remain positive. They keep a diversified
portfolio of 8 to 12 stocks from various industries to reduce market
risk, but they increase their position in growth stocks that perform
well over time and that meet or beat market expectations. They use
market volatility and dips as buying opportunities. Their strategy
considers stock valuation to be important but understands that historical
multiples do not apply to many new economy stocks. However, the New Age
Investor keeps a
level head and always watches market conditions so they are not over-positioned in any given sector when the market signals otherwise. These
are just a few of the important traits of the New Age Investor. In
future columns I will discuss these traits and others in more detail.
Recently, the technology sector has been receiving a lot of attention.
Many technology stocks have appreciated at such a high rate that the
Federal Reserve Chairman, Alan Greenspan, has continually increased interest
rates to try to slow down equity appreciation from occurring (which may
be inflationary) in the technology sector by playing with investor
psychology. In this environment, the question becomes which technology
stocks will continue to perform well in the future regardless of the
market psychology effect.
To meet the demands of the new market
environment, the New Age Investor uses technical analysis, market
analyst predictions and information, and other investor input to help
identify growth stocks for future investment. Special care is given to
information obtained from market analyst. The New Age Investor never
trusts the analyst but uses this information as a starting point. They
make their own determination on analyst recommendations through in-depth
research. They do this by using available information such as Dot.com
investment web pages to provide promising stock and business sector
information. Jim Jubak (Jubak's Journal) and Jon Markman (Super Models)
are two reputable analysts with MSN MoneyCentral that provide excellent
technical insight to get the New Age Investor started. The message
boards associated with these two analysts, along with other message
boards, often provide valuable information that the New Age Investor can
use to help formulate their investment decisions. The New Age Investor
always remembers that with the good information there is bad, and self-directed analysis must always be performed.
Once key industries and
stocks have been identified, the fun begins. A company's balance sheet,
income statement, and subsequent ratio analyses are researched. In
subsequent columns we will discuss these items in further detail. It is
very important to look at the price chart for each potential stock
investment. Trends can be identified by looking at a company's price
chart over time. This information is then used to determine an entry
point for any given stock investment. One example would be to use the
50-day or 200-day moving average as a starting point to help make an
entry point determination. It is important to determine the lower and
upper trending ranges for stocks to help determine entry and selling
points. Other technical analyses are also performed to help make entry
point determinations and to decide if and when to purchase a stock. For example,
the New Age Investor follows the money. They watch how fast money is
flowing into a stock to help identify a ceiling or possible selling
point. Money flow and on-balance volume are two indicators used to help
make this determination. MSN MoneyCentral provides these as well as
other technical indicators on any stock by clicking on
"analysis" when in the chart mode. In addition, FlexTrader
also provides in-depth free technical analysis options to the New Age
Investor. Although extensive time and research is involved to become a
New Age Investor, the monetary rewards are well worth it.
|
