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Originally Posted by tvp2003
So, for the novice investor, how specific should he or she be getting with respect to choosing what to invest in? Sector specific? Stock specific? Mutual fund specific? It's becoming more and more apparent that some companies and/or industries will make it whereas others won't (or at the very least, some are in better shape than others) -- what does that mean for diversification?
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Novice investor usually means little cash. Buy stocks and you're probably dead. You may hit a home run your first at bat, but I can pretty well guarantee that it'll explode on you. Funds are the best place to start. Call Slava.
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Originally Posted by dustygoon
There will be a time to buy. This is a once in a lifetime opportunity to pick up market leading companies at bombed out prices. I have bough some equities but i have more than hedged those with buying double short ETF's. The stocks I have bought are higher dividend, strong market leader, and strong cash flow. Return on equity is good to look at while P/E ratios are a joke. Equity analysts collectively think S&P500 earnings will grow +7% still in 2009.
History suggests that markets will rally quickly.....when markets bounce back from a recession, 1/3 of gains happen in first 30-40 days. Stock market bottom has averaged to occur 4 months before the economy bottoms. So i guess timing wise, don't wait for GDP to turn positive, but look for some economic indicators looking like they are turning around.
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I posted these statistics a long time ago in this thread. In the first 40 days of the recovery the market usually recovers a third of the bear-market losses. In the first year, 80 per cent. Stocks tend to move about six months before the economy does. This is because investors make decisions in anticipation of their expectations for the economy. Now I'm thinking economic recovery mid way through 2009, so market recovery should start early in the new year. Also, a big part of the reason for market moves is investor emotion. As the calendar turns and people in the Excited States look forward to a new president, that could be a spark that could start the blaze. That's a good analogy. Sometimes it just takes a small spark to start an inferno.