Stocks

With our economy in slow-motion growth, will investors continue to see good gains? You hear different scenarios all the time, but on balance, the case for cautious optimism is the most compelling.

We end each year with a plethora of fearless forecasts from gurus and sellers of books and newsletters. As we move into a new year, much ink and hot air is expended explaining why or why not certain prognostications did or did not come to fruition.

A market that goes up in a straight line, like the current one, sows the seeds of its own grief. Momentum investing, where a rising market encourages investors to push shares even higher, can be dangerously seductive and make you think that investing is easy.

All you do is put your money into the machine and it goes up. If the needle drops for a moment, just drop in some more cash and it goes back up again.

Springtime ushers in a rush of annual shareholder meetings, but these days, few investors are making this corporate pilgrimage. That’s a mistake. Attending at least one meeting for a stock you own is a very good idea.

Every publicly traded company holds an annual shareholder meeting, and most companies fulfill this requirement with as little time or meaningful content as possible. But failing to participate can be costly when investors and executive managers fail to look each other in the eye.

Stimulus, whether from low interest rates or high government spending, has failed to produce robust economic growth. Its one accomplishment is to keep hope alive, however ill-deserved, and that occasionally spurs market upturns. This is true in the U.S., where the recession hit six years ago, and also in Japan, which has endured this phenomenon for more than two decades.

Japan’s experience may show us our future: economic stasis despite stimulus, but some occasional stock market growth. There are, to be sure, some crucial contrasts between the two nations.

As if you needed more proof that frequent trading is not for regular folks, the high-frequency trading bots recently sent stocks into a free fall for a moment after a fake tweet hit the newswires. This miniature flash crash underscores how institutional investors’ trading algorithms stack the deck against individual investors.

The stock market’s future is unknowable. But amid periodic market jolts due to Europe and the like, you can buffer your portfolio from downturns or take advantage of possible price spurts. You employ a time-honored method that too few individual investors understand – options.

An option is a standardized contract to either buy or sell a stock at a pre-determined price on a specific date. Unlike simply buying and selling stocks, options present less risk because you don’t lose as much money if your intuition fails you.

To preserve harmony in a relationship, sometimes it’s easier to just go with the flow. When it comes to money and investing, however, going with the flow can lead to troubled waters. Men traditionally dominate a couple’s finances, but women are often better at investing.  So women, recognize that there is a good chance your instincts are more consistent with financial best practices, and take a stand for both of your financial futures.

Most real estate investment trusts, which hold commercial properties and make money from rent, are traded on stock exchanges. But lately they are expensive and don’t pay the lush dividends they used to. But REITs that don’t offer traded shares still offer good payouts.

Successful golfing and successful investing are similar. The key to both is determining how much risk is appropriate to accomplish your goals and when it is not.

Watching the different styles of the golfers at the Masters reminds me of an analogy that I sometimes use while talking to prospective clients. While each of the golfers tries to complete the four rounds of golf in the least amount of strokes, the way they accomplish this varies. That is also true for investors.

Defensive sector stocks surged ahead of aggressive ones in the last month or so. That seems like a bearish sign. Yet it really isn’t.

Usually, aggressive stocks – in more cyclical sectors like industrials and energy – lead in a robust bull market. So with the opposite happening, some pundits see this as a sign that investors remain tentative and unready to take on risk, despite equities’ rallying since last November. They view it as a reluctance to invest that doesn't bode well for stocks.