Stock Market Wisdom

The best way to stay out of trouble in the stock market is to invest in a mutual fund that is managed by experts. It requires no research on your part and can give you a 10 percent return. These include funds like the Magellan fund or the Templeton World Fund. If you invested $2000 a year in the Templeton World Fund for 30 years, you could have a million dollars on retirement (no guarantees). Alternatively, you could invest in a strategy similar to the Dalio All Weather Portfolio, which never loses money but does not grow much either. The All Weather Portfolio is constructed like this: 30 percent stocks, 7.5 percent commodities, 7.5 percent gold, interim bonds 15 percent, long term bonds 40 percent.

When it comes to finance, pay off your debts first before you invest in stocks. You shouldn’t invest in stocks before you have a house, which is a safer investment.

Picking Stocks

According to Ben Graham, the expert of value investing, there are 7 value stock picking criteria:

1. stick with stocks that have a S and P rating of B+ or better
2. Debt to current asset ratio of less than 1.1
3. current ratio (assets/current liabilities) less than 1.5
4. positive earnings per growth shares
5. P/E ratios of 9.0 or less
6. Price to book value ratio of less than 1.2
7. invest in companies that offer dividends